McDONALD'S REPORTS SECOND QUARTER 2024 RESULTS

Rhea-AI Summary

McDonald's reported second quarter 2024 results, showing a 1% increase in consolidated revenues to nearly $6.5 billion in constant currencies. However, global comparable sales decreased by 1.0% across all segments. Systemwide sales to loyalty members reached over $26 billion for the trailing twelve-month period and approximately $7 billion for the quarter.

Key financial metrics include:

• Consolidated operating income decreased 6% (5% in constant currencies)
• Diluted earnings per share was $2.80, a decrease of 11% (10% in constant currencies)
• U.S. comparable sales decreased 0.7%
• International Operated Markets segment decreased 1.1%
• International Developmental Licensed Markets segment decreased 1.3%

The company faced challenges due to negative comparable guest counts and the ongoing impact of the war in the Middle East, particularly affecting the China market.

Positive

• Consolidated revenues increased 1% in constant currencies to nearly $6.5 billion
• Systemwide sales to loyalty members reached over $26 billion for the trailing twelve-month period
• Average check growth due to strategic menu price increases
• Continued digital and delivery growth positively contributed to results
• Positive comparable sales in Latin America and Japan

Negative

• Global comparable sales decreased 1.0% across all segments
• Consolidated operating income decreased 6% (5% in constant currencies)
• Diluted earnings per share decreased 11% to $2.80
• Negative comparable guest counts in the U.S.
• Negative comparable sales in France and China
• Higher Selling, general, and administrative expenses
• Higher interest expense and a higher effective tax rate

Insights

Financial Analyst

McDonald's Q2 2024 results paint a challenging picture for the fast-food giant. The 1% decrease in global comparable sales across all segments is concerning, especially given the company's historical growth trajectory. This decline, coupled with flat consolidated revenues (1% increase in constant currencies), suggests McDonald's is facing headwinds in maintaining its market position.

The 6% decrease in consolidated operating income (5% in constant currencies) is particularly worrying. Even after adjusting for non-cash impairment and restructuring charges, the 2% decrease (flat in constant currencies) indicates underlying operational challenges. The diluted EPS of $2.80, an 11% decrease year-over-year, further underscores these difficulties.

However, it's not all doom and gloom. The company's focus on digital and delivery growth in the U.S. market shows promise, as does the $26 billion in systemwide sales to loyalty members over the trailing twelve-month period. This demonstrates McDonald's ability to leverage technology and customer loyalty programs effectively.

Investors should closely monitor McDonald's ability to navigate inflationary pressures and changing consumer behaviors. The company's "Accelerating the Arches" strategy will be important in addressing these challenges and returning to growth.

Market Research Analyst

McDonald's Q2 2024 results reflect broader market trends and shifting consumer behaviors. The negative comparable guest counts in the U.S., partly offset by average check growth due to strategic menu price increases, suggest consumers are becoming more price-sensitive. This aligns with CEO Chris Kempczinski's statement about consumers being "more discriminating with their spend."

The performance variations across different markets are noteworthy. The negative impact in France within the International Operated Markets segment and the continued effects of geopolitical issues in the Middle East highlight the importance of geographic diversification for global brands like McDonald's.

The focus on chicken and loyalty as strategic growth drivers is a smart move. With $7 billion in systemwide sales to loyalty members in Q2 alone, McDonald's is clearly seeing success in customer retention and data-driven marketing. This strategy could be important in navigating the current economic landscape.

However, the 1.3% decrease in the International Developmental Licensed Markets segment, particularly the negative comparable sales in China, is a red flag. As one of the largest growth markets, China's performance can significantly impact McDonald's global strategy and future growth prospects.

Tech Expert

McDonald's Q2 2024 results underscore the growing importance of digital initiatives in the fast-food industry. The company's emphasis on "digital and delivery growth" in the U.S. market is a clear indicator of its commitment to technological innovation. This aligns with broader industry trends towards omnichannel experiences and convenience-driven services.

The $26 billion in systemwide sales to loyalty members across 50 loyalty markets over the trailing twelve-month period is particularly impressive. This demonstrates McDonald's success in leveraging data analytics and personalized marketing to drive customer engagement and repeat purchases. The $7 billion figure for Q2 alone suggests strong momentum in this area.

However, the overall decrease in comparable sales across all segments indicates that digital initiatives alone are not enough to offset broader economic and market challenges. McDonald's will need to continue innovating in areas such as mobile ordering, AI-driven menu optimization and automated kitchen technologies to improve operational efficiency and customer experience.

The company's "Accelerating the Organization" effort, which includes $57 million in restructuring charges for the quarter, likely involves significant technological upgrades. While costly in the short term, these investments could position McDonald's for stronger performance in an increasingly digital-first consumer landscape.

• Consolidated revenues for the quarter were nearly $6.5 billion, an increase over prior year of about 1% in constant currencies
• Systemwide sales* to loyalty members across 50 loyalty markets were over $26 billion for the trailing twelve-month period and approximately $7 billion for the quarter

CHICAGO, July 29, 2024 /PRNewswire/ -- McDonald's Corporation today announced results for the second quarter ended June 30, 2024.

"We are confident that Accelerating the Arches is the right playbook for our business and as consumers are more discriminating with their spend, we are focused on the outstanding execution of delivering reliable, everyday value and accelerating strategic growth drivers like chicken and loyalty," said Chairman and CEO Chris Kempczinski.

Second quarter financial performance:

• Global comparable sales decreased 1.0%, reflecting negative comparable sales across all segments:
  • U.S. decreased 0.7%
  • International Operated Markets segment decreased 1.1%
  • International Developmental Licensed Markets segment decreased 1.3%
• Consolidated revenues were flat (increased 1% in constant currencies).
• Systemwide sales decreased 1% (increased 1% in constant currencies).
• Consolidated operating income decreased 6% (5% in constant currencies). Results included $97 million of pre-tax non-cash impairment charges and $57 million of pre-tax restructuring charges associated with Accelerating the Organization. Excluding these current year charges, as well as prior year pre-tax charges of $18 million, consolidated operating income decreased 2% (was flat in constant currencies).**
• Diluted earnings per share was $2.80, a decrease of 11% (10% in constant currencies). Excluding the current year charges described above of $0.17 per share, diluted earnings per share was $2.97, a decrease of 6% (5% in constant currencies) when also excluding prior year charges.**

*Refer to page 4 for a definition of Systemwide sales.
**Refer to pages 2 and 3 for additional details on our results for the second quarter 2024 and 2023.

1

COMPARABLE SALES

		Increase/(Decrease)
		Quarters Ended June 30,
		2024		2023
U.S.		(0.7) %		10.3 %
International Operated Markets		(1.1)		11.9
International Developmental Licensed Markets		(1.3)		14.0
Total		(1.0) %		11.7 %

• U.S.: Comparable sales results were driven by negative comparable guest counts, partly offset by average check growth due to strategic menu price increases. Successful restaurant level execution and continued digital and delivery growth positively contributed to results.
• International Operated Markets: Segment performance was impacted by negative comparable sales across a number of markets, driven by France.
• International Developmental Licensed Markets: The continued impact of the war in the Middle East and negative comparable sales in China more than offset positive comparable sales in Latin America and Japan.

KEY FINANCIAL METRICS - CONSOLIDATED
Dollars in millions, except per share data

	Quarters Ended June 30,										Six Months Ended June 30,
	2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation			2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation
Revenues	$     6,490		$     6,498		—	%		1	%		$    12,659		$    12,395		2	%		2	%
Operating income	2,920		3,104		(6)			(5)			5,655		5,637		—			1
Net income	2,022		2,310		(12)			(11)			3,951		4,113		(4)			(3)
Earnings per share-diluted	$       2.80		$       3.15		(11)	%		(10)	%		$        5.46		$        5.60		(2)	%		(2)	%

Results for 2024 included the following:

• Net pre-tax charges of $97 million, or $0.11 per share, for the quarter and $89 million, or $0.10 per share, for the six months, primarily related to non-cash impairment charges associated with the anticipated future sale of McDonald's business in South Korea
• Pre-tax charges of $57 million, or $0.06 per share, for the quarter and $100 million, or $0.10 per share, for the six months, related to restructuring charges associated with the Company's internal effort to modernize ways of working (Accelerating the Organization)

Results for 2023 included the following:

• Pre-tax charges of $18 million, or $0.02 per share, for the quarter and $198 million, or $0.20 per share, for the six months, related to the Company's Accelerating the Arches growth strategy, including restructuring charges associated with Accelerating the Organization

Excluding the above items, lower sales performance and higher Selling, general, and administrative expenses drove negative operating income performance for the quarter. Results for the six months reflected positive operating income performance driven primarily by higher sales-driven Franchised margins, partly offset by higher Selling, general, and administrative expenses. Results for both periods reflected higher interest expense and a higher effective tax rate.

2

NET INCOME AND EARNINGS PER SHARE-DILUTED RECONCILIATION
Dollars in millions, except per share data

	Quarters Ended June 30,
	Net Income										Earnings per share - diluted
	2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation			2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation
GAAP	$   2,022		$   2,310		(12)	%		(11)	%		$      2.80		$      3.15		(11)	%		(10)	%
(Gains)/Charges	124		14								0.17		0.02
Non-GAAP	$   2,146		$   2,324		(8)	%		(7)	%		$      2.97		$      3.17		(6)	%		(5)	%

 

	Six Months Ended June 30,
	Net Income										Earnings per share - diluted
	2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation			2024		2023		Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation
GAAP	$   3,951		$   4,113		(4)	%		(3)	%		$      5.46		$      5.60		(2)	%		(2)	%
(Gains)/Charges	150		148								0.20		0.20
Non-GAAP	$   4,101		$   4,261		(4)	%		(3)	%		$      5.66		$      5.80		(2)	%		(2)	%

3

THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED THROUGHOUT THIS RELEASE

Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

Comparable sales and comparable guest counts are compared to the same period in the prior year and represent sales and transactions, respectively, at all restaurants, whether owned and operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction, natural disasters, pandemics and acts of war, terrorism or other hostilities. Comparable sales exclude the impact of currency translation and the sales of any market considered hyperinflationary (generally identified as those markets whose cumulative inflation rate over a three-year period exceeds 100%), which management believes more accurately reflects the underlying business trends. Comparable sales are driven by changes in guest counts and average check, the latter of which is affected by changes in pricing and product mix.

Systemwide sales include sales at all restaurants, whether owned and operated by the Company or by franchisees. Systemwide sales to loyalty members is comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-owned and operated and franchised restaurants. Systemwide sales to loyalty members are measured across approximately 50 markets with loyalty programs. Systemwide sales to loyalty members represents an aggregation of the prior four quarters of sales to loyalty members active in the last 90 days. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The Company's revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates. Changes in Systemwide sales are primarily driven by comparable sales and net restaurant unit expansion. 

Free cash flow, defined as cash provided by operations less capital expenditures, and free cash flow conversion rate, defined as free cash flow divided by net income, are measures reviewed by management in order to evaluate the Company's ability to convert net profits into cash resources, after reinvesting in the core business, that can be used to pursue opportunities to enhance shareholder value.

RELATED COMMUNICATIONS

This press release should be read in conjunction with Exhibit 99.2 to the Company's Form 8-K filing for supplemental information related to the Company's results for the quarter and six months ended June 30, 2024.

McDonald's Corporation will broadcast its investor earnings conference call live over the Internet at 7:30 a.m. (Central Time) on July 29, 2024. A link to the live webcast will be available at www.investor.mcdonalds.com. There will also be an archived webcast available for a limited time thereafter.

UPCOMING COMMUNICATIONS

For important news and information regarding McDonald's, including the timing of future investor conferences and earnings calls, visit the Investor Relations section of the Company's Internet home page at www.investor.mcdonalds.com. McDonald's uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.

ABOUT McDONALD'S

McDonald's is the world's leading global foodservice retailer with over 40,000 locations in over 100 countries. Approximately 95% of McDonald's restaurants worldwide are owned and operated by independent local business owners.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from expectations are detailed in the Company's filings with the Securities and Exchange Commission, including the risk factors discussed in Exhibit 99.2 to the Company's Form 8-K filing on July 29, 2024. The Company undertakes no obligation to update such forward-looking statements, except as may otherwise be required by law.

4

McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Dollars and shares in millions, except per share data
Quarters Ended June 30,	2024		2023		Inc/ (Dec)
Revenues
Sales by Company-owned and operated restaurants	$        2,461		$        2,487		$            (26)		(1) %
Revenues from franchised restaurants	3,940		3,933		7		—
Other revenues	89		77		12		16
TOTAL REVENUES	6,490		6,498		(8)		—
Operating costs and expenses
Company-owned and operated restaurant expenses	2,074		2,091		(17)		(1)
Franchised restaurants-occupancy expenses	629		618		11		2
Other restaurant expenses	69		57		12		21
Selling, general & administrative expenses
Depreciation and amortization	101		95		6		6
Other	590		567		23		4
Other operating (income) expense, net	107		(36)		143		n/m
Total operating costs and expenses	3,570		3,393		177		5
OPERATING INCOME	2,920		3,104		(184)		(6)
Interest expense	373		330		43		13
Nonoperating (income) expense, net	(9)		(43)		34		(79)
Income before provision for income taxes	2,555		2,817		(262)		(9)
Provision for income taxes	533		506		27		5
NET INCOME	$        2,022		$        2,310		$          (288)		(12) %
EARNINGS PER SHARE-DILUTED	$           2.80		$           3.15		$         (0.35)		(11) %
Weighted average shares outstanding-diluted	722.0		734.3		(12.3)		(2) %

n/m Not meaningful

5

McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Dollars and shares in millions, except per share data
Six Months Ended June 30,	2024		2023		Inc/ (Dec)
Revenues
Sales by Company-owned and operated restaurants	$        4,816		$        4,711		$            105		2 %
Revenues from franchised restaurants	7,663		7,521		142		2
Other revenues	180		163		17		10
TOTAL REVENUES	12,659		12,395		264		2
Operating costs and expenses
Company-owned and operated restaurant expenses	4,109		4,014		95		2
Franchised restaurants-occupancy expenses	1,256		1,216		40		3
Other restaurant expenses	137		120		17		14
Selling, general & administrative expenses
Depreciation and amortization	199		194		5		3
Other	1,212		1,121		91		8
Other operating (income) expense, net	90		93		(3)		(3)
Total operating costs and expenses	7,003		6,759		244		4
OPERATING INCOME	5,655		5,637		18		—
Interest expense	746		660		86		13
Nonoperating (income) expense, net	(54)		(107)		53		(50)
Income before provision for income taxes	4,964		5,084		(120)		(2)
Provision for income taxes	1,013		971		42		4
NET INCOME	$        3,951		$        4,113		$          (162)		(4) %
EARNINGS PER SHARE-DILUTED	$           5.46		$           5.60		$         (0.14)		(2) %
Weighted average shares outstanding-diluted	724.0		734.9		(10.9)		(1) %

n/m Not meaningful

6

 

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SOURCE McDonald's Corporation

FAQ

What was McDonald's (MCD) revenue for Q2 2024?

McDonald's reported consolidated revenues of nearly $6.5 billion for Q2 2024, representing a 1% increase in constant currencies compared to the previous year.

How did McDonald's (MCD) global comparable sales perform in Q2 2024?

McDonald's global comparable sales decreased by 1.0% in Q2 2024, reflecting negative comparable sales across all segments: U.S. (-0.7%), International Operated Markets (-1.1%), and International Developmental Licensed Markets (-1.3%).

What was McDonald's (MCD) earnings per share for Q2 2024?

McDonald's reported diluted earnings per share of $2.80 for Q2 2024, representing a decrease of 11% (10% in constant currencies) compared to the previous year.

How much were McDonald's (MCD) systemwide sales to loyalty members in Q2 2024?

McDonald's reported systemwide sales to loyalty members of approximately $7 billion for Q2 2024, and over $26 billion for the trailing twelve-month period across 50 loyalty markets.

What factors affected McDonald's (MCD) performance in International Markets in Q2 2024?

McDonald's International Markets performance was impacted by negative comparable sales in France, the continued impact of the war in the Middle East, and negative comparable sales in China. However, this was partially offset by positive comparable sales in Latin America and Japan.