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Tue 24th Oct 2017 - McDonald’s reports like-for-likes up 6% in third quarter
McDonald’s reports like-for-likes up 6% in third quarter: McDonald’s has reported global like-for-likes rose 6% in its third quarter ended 30 September 2017. Chief executive Steve Easterbrook said: “We are serving more customers, more often by offering great tasting food at a good value with the quick service and friendly hospitality they expect from McDonald’s. Our positive comparable sales and guest counts across all of our operating segments during the third quarter demonstrate broad-based momentum throughout our business that builds upon our strong first half of 2017.” The company stated: “In the US, third-quarter like-for-like sales increased 4.1%, reflecting the national beverage and ‘McPick 2’ value promotions, along with the continued success of the Signature Crafted premium sandwich platform. Operating income for the quarter increased 6%, reflecting higher sales-driven franchised margin dollars and G&A savings. Like-for-like sales for the International Lead segment increased 5.7% for the quarter, led by continued momentum in the UK and Canada, as well as positive results across all other markets. The segment’s operating income increased 21% (17% in constant currencies), fuelled by sales-driven improvements in franchised margin dollars. In the High Growth segment, third-quarter like-for-like sales increased 6.2%, led by strong performance in China and positive results across the majority of the segment. The segment’s operating income for the quarter included a gain of about $850m related to the refranchising of China and Hong Kong, partly offset by unrelated non-cash impairment charges. Excluding these items, the segment’s operating income for the quarter increased 7% (3% in constant currencies), reflecting higher sales-driven margin dollars. In the Foundational markets, third-quarter like-for-like sales rose 10.2%, reflecting positive sales performance across all geographic regions. For the segment, operating income decreased due to the company’s refranchising initiatives and higher restaurant technology spending, partly offset by the benefit from comparison to the prior year’s strategic charges.” Chief financial officer Kevin Ozan added: “During the quarter, we refranchised our businesses in China and Hong Kong, reaching our target to refranchise 4,000 restaurants more than a year ahead of schedule. Completing this transaction brings us closer to the customers and communities we serve in these markets and creates a better opportunity to unlock their full growth potential. Our more heavily franchised structure will continue to drive shareholder value by providing a more stable revenue and income stream with higher returns on invested capital.” Easterbrook added: “Our ‘Velocity Growth Plan’ is the right strategy for McDonald’s to achieve long-term, profitable growth and we are on track to succeed with our commitment and focus on execution. We’ve made progress in many areas of our business already, including optimising our restaurant ownership mix and running better restaurants. At the same time, we also are making strides with initiatives such as delivery, mobile order and pay, as well as the ‘Experience of the Future’ transformation of our restaurants that will make the experience more convenient, personalised and enjoyable for our customers.” Due to the impact of refranchising, consolidated revenues decreased 10% (12% in constant currencies). Consolidated operating income increased 44% (42% in constant currencies), which benefited from a gain of about $850m on the sale of the Company’s businesses in China and Hong Kong. Excluding the impact of the gain, as well as unrelated strategic charges, consisting of current quarter and prior year restructuring and non-cash impairment charges in connection with the Company’s global G&A and refranchising initiatives, consolidated operating income increased 5% (3% in constant currencies), primarily due to strong comparable sales performance across all segments. Diluted earnings per share of $2.32 increased 55% (53% in constant currencies). Excluding the impact of the current year gain and these unrelated strategic charges, which total $0.56 per share, diluted earnings per share was $1.76. Excluding these 2017 items as well as the $0.12 per share of prior year strategic charges, the company’s diluted earnings per share increased 9% (7% in constant currencies). It returned $2.9bn to shareholders through share repurchases and dividends. In addition, the company announced a 7% increase in its quarterly dividend to $1.01 beginning in the fourth quarter, which McDonald’s said “demonstrated management’s continued confidence in the company’s performance”.


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