McDonald's Q4 US sales slip 1.3%

by Erica Shaffer
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 McDonalds
Global comparable sales advanced on growth in the United Kingdom.
 

OAK BROOK, Ill. – Fourth quarter comparable sales decline in the United States while global results beat expectations with a 2.7 percent increase, Oak Brook, Illinois-based McDonald’s Corp. reported.

For the fourth quarter ended Dec. 31, US comparable sales declined 1.3 percent as enthusiasm for the company’s All-Day Breakfast launch waned. Meanwhile, McDonald’s global comparable sales increased on strong performances in the International Lead, High Growth and Foundational segments of the burger chain’s business.

“We applied the necessary rigor and discipline to strengthen the company and our financial performance,” president and CEO Steve Easterbrook said in a statement. “Our efforts yielded a more streamlined and focused organization that generated solid fourth quarter and full year results, including our strongest annual global comparable sales growth since 2011 along with record franchisee cash flows in many of our major markets. I am confident that we’re on the right path as we pursue our goal of being recognized by our customers as the modern, progressive burger company.”

Net income for the quarter was $1,193.4 million, or $1.44 per diluted share, compared with $1,206.2 million, or $1.31 per diluted share in 2015.

Revenues for the quarter declined 5 percent to $6,028.9 million compared with $6,341.3 million in the year-ago quarter. The company attributed the result to refranchising.

In the International Lead segment comparable sales climbed 2.8 percent on strong comparable sales growth across most of the segment, led by the United Kingdom, McDonald’s reported. Fourth quarter operating income for the segment increased 1 percent (6 percent in constant currencies), driven by sales improvements in franchised margin dollars across most markets.

Comparable sales advanced 4.7 percent in the company’s High Growth segment led by strong performance in China and positive results across the entire segment. Operating income in the segment jumped 16 percent (18 percent in constant currencies), mostly on improved restaurant profitability in China, which benefited from recent valued-added tax reform, the company said.

Japan posted a strong performance in the Foundational markets segment, which reported an 11.1 percent increase in comparable sales in the fourth quarter. Certain markets in Latin America as well as solid results across the segment's remaining geographic regions also helped results. For the segment, which includes Corporate SG&A and other costs, operating income increased for the quarter, lifted by the sale of McDonald’s Singapore in connection with the company’s refranchising initiatives, as well as improved performance in Japan.

“For McDonald's, 2016 was a year of purposeful change as we focused on the key elements of our turnaround plan — strengthening our business to drive long-term sustainable growth by sharpening our focus on our customers, right-sizing our structure and putting the right talent in place to lead the company into the future,” Easterbrook said. “I’m confident that we are well-positioned to transition to a longer-term focus in 2017. Our refranchising efforts and financial discipline will enable us to direct our capital and G&A resources towards new strategic opportunities to deliver on our long-term strategy.

“We look forward to providing further details on our strategy and financial targets later this quarter,” Easterbrook added. “As we begin the first quarter of 2017, we are mindful of the comparison we face against first quarter 2016 results, which benefited from leap year, favorable weather and continued momentum from All-Day Breakfast in the US.”

For 2016, McDonald’s reported net income of $4,686.5 million, or $5.44 per diluted share, up 3 percent from $4,529.3 million, or $4.80 per diluted share, in net income reported a year ago. Revenues for the year declined 3 percent to $24,621.9 million from $25,413.0 million in 2015.

Global comparable sales increased 3.8 percent in 2016, including positive comparable sales across all segments.

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