McDonald's ends Q4 with 'momentum'

McDonald's reports positive comparable sales for fourth quarter and full year, thanks to "turnaround plan."

January 25, 2016

3 Min Read
McDonald's ends Q4 with 'momentum'

McDonald's Corp. has announced results for its fourth quarter and year ended Dec. 31, 2015.

"We took bold, urgent action in 2015 to reset the business and position McDonald's to deliver sustained profitable growth," McDonald's president and chief executive officer Steve Easterbrook said. "We ended the year with momentum, including positive comparable sales across all segments for both the quarter and the year — a testament to the swift changes we made and the early impact of our turnaround efforts. We enter 2016 committed to managing the business for the long term and aligned as a system around the critical imperative that we must run great restaurants each and every day for our valued customers."

McDonald's fourth-quarter results included:

* Global comparable sales increased 5.0%;

* Consolidated revenues decreased 4% (increase of 5% in constant currencies);

* Consolidated operating income increased 7% (16% in constant currencies), and

* Diluted earnings per share were $1.31, up 16% (26% in constant currencies).

Full-year results included:

* Global comparable sales increased 1.5%;

* Consolidated revenues decreased 7% (increase of 3% in constant currencies);

* Consolidated operating income decreased 10% (flat in constant currencies), and

* Diluted earnings per share were flat at $4.80 (up 10% in constant currencies).

The company returned $2.3 billion to shareholders through share repurchases and dividends in the fourth quarter and $9.4 billion for the full year, bringing the cumulative return to shareholders to $15.8 billion against a targeted return of about $30 billion for the three-year period ending 2016.

In the U.S., McDonald's fourth-quarter comparable sales increased 5.7%, benefiting from the October launch of All Day Breakfast and, to a lesser extent, unseasonably mild weather. Operating income for the quarter rose 30%, driven by positive comparable sales and a gain from the strategic sale of a unique restaurant property. McDonald's said generating sustained, positive guest traffic remains a top priority for the U.S. business segment for 2016.

Comparable sales for the international lead segment increased 4.2% for the quarter, led by strong performance in the U.K., Canada and Australia. Fourth-quarter operating income decreased 5% (increased 8% in constant currencies), benefiting from higher franchised margins. Positive consumer response to multiple menu, service and value initiatives contributed to the segment's performance, while macroeconomic concerns, particularly in France, negatively affected quarterly sales performance.

In the high growth markets, fourth-quarter comparable sales increased 3%, reflecting positive performance in Russia and China. Operating income increased 27% (45% in constant currencies) due, in part, to the comparison against the prior year supplier issue in China, along with an increase in the segment's franchised margins.

Fourth-quarter comparable sales rose 5.9% in the foundational markets, fueled by broad-based strength in Asia and Europe. Operating income for the quarter was negatively affected by strategic charges related to the company's global refranchising efforts and weaker results in Japan.

McDonald's chief financial officer Kevin Ozan noted, "In November, we announced financial goals in conjunction with our business turnaround plan. We outlined specific targets to return about $30 billion to shareholders through a combination of dividends and share repurchases for the three-year period ending 2016, plans to refranchise about 4,000 restaurants by the end of 2018 and reduce our net annual G&A spending by $500 million, the vast majority of which will be realized by the end of 2017. These targets are designed to enhance long-term shareholder value while supporting the work underway to reignite our business results."

Ozan continued, "For 2016, we expect our capital expenditures to remain at about $2 billion — split fairly evenly between opening new restaurants and reinvesting in existing restaurants as we pursue targeted opportunities to drive long-term, profitable growth."

Easterbrook concluded, "We are demonstrating that our turnaround plan is key to restarting growth and becoming a modern and progressive burger company. I am inspired by the dedication and collective determination of our U.S., international lead, high growth and foundational markets to leverage our competitive strengths as they pursue their growth opportunities. As we enter 2016, we expect continued positive top-line momentum across all segments."

McDonald's is the world's leading global foodservice retailer, with more than 36,000 locations in more than 100 countries. More than 80% of McDonald's restaurants worldwide are locally owned and operated.

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