McDonald's Global Comparable Sales Relatively Flat in Q2

23 Jul 2014 --- McDonald's Corporation has announced results for the second quarter ended June 30, 2014, reflecting higher revenues and earnings per share for the quarter.

"The McDonald's System is committed to creating the best experience for our customers by offering great-tasting food and beverages and a memorable and contemporary experience," said McDonald's President and Chief Executive Officer Don Thompson. "During the quarter, we evolved our strategic Plan to Win framework to enhance our focus on the customer through insights, planning and actions. To reignite momentum over the next 18 months, we're focused on fortifying the foundational elements of our business by concentrating our efforts on compelling value, marketing and operations excellence to become a more relevant and trusted brand."

Second Quarter results included:
•Global comparable sales were relatively flat, reflecting higher average check and negative guest traffic in all major segments
•Consolidated revenues increase of 1% (1% in constant currencies), benefiting from expansion
•Consolidated operating income was flat (decrease of 1% in constant currencies)
•Diluted earnings per share of $1.40, an increase of 1% (1% in constant currencies), benefiting from a decrease in diluted weighted average shares outstanding
•Returned $1.6 billion to shareholders through dividends and share repurchases, in connection with our $18-$20 billion, 3-year cash return target

In the U.S., second quarter comparable sales decreased 1.5% while operating income rose 1%. Results for the quarter reflected negative comparable guest traffic amid ongoing broad-based challenges. Looking ahead, McDonald's U.S. is intent on strengthening the overall customer experience to effectively position the segment for long-term growth. Key areas of focus include service excellence, enhanced marketing, and value, core menu and breakfast daypart initiatives.

In Europe, comparable sales declined 1.0% and operating income was flat (decrease of 4% in constant currencies) for the second quarter. The U.K. and France delivered solid comparable sales and operating income results for the quarter. Germany's quarterly performance reflected ongoing weakness. Emphasis on compelling premium menu offers, renewed focus on core menu and value options, and the roll-out of blended ice beverages in several markets supported the quarter's performance.

APMEA's (Asia/Pacific, Middle East and Africa) second quarter comparable sales increased 1.1%, reflecting strong comparable sales performance in China, as well as positive performance in many other markets. Results were impacted by continued weakness in Japan. APMEA's second quarter operating income declined 2% (increase of 1% in constant currencies). Enhanced value offerings, locally-relevant product promotions, convenience initiatives and new store development were positive contributors to the segment's results.

Pete Bensen, McDonald's Chief Financial Officer noted, "McDonald's underlying financial strength and our ability to build long-term shareholder value have been hallmarks of our strategic plan. In keeping with this discipline, during the quarter we announced plans to return $18-$20 billion to shareholders through a combination of dividends and share repurchases between 2014 and 2016. This cash return target reflects a 10-20% increase over the amount of cash returned in the prior 3-year period and is based on several ongoing factors, including the significant free cash flow generated from our operations, as well as the use of cash proceeds from debt additions and refranchising of at least 1,500 restaurants. These actions are a testament to our commitment to enhancing shareholder value."

Don Thompson concluded, "Overall, 2014 is a year of strengthening the foundational elements of our business that are critical to enabling and advancing our longer-term strategies. Heading into 2014, we acknowledged that we did not expect any material changes to the operating environment this year. As such, full year 2014 global comparable sales are expected to be relatively similar to year-to-date June performance, with July global comparable sales expected to be negative. While near-term results are expected to remain muted, sizable growth opportunities remain, and we are committed to pursuing these opportunities through continuous improvement in everything we do - from the food we serve, to our engagement with our customers, to the management of our financial resources."