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Morning Briefing for pub, restaurant and food wervice operators

Thu 23rd Jul 2015 - McDonald’s reports global like-for-likes down 0.7% in second quarter
McDonald’s reports global like-for-likes down 0.7% in second quarter: McDonald’s has reported global like-for-likes down 0.7% for the second quarter ended June 30, 2015, reflecting ‘negative guest traffic in all major segments’. Like-for-likes were down 2% in the US, but up 1.2% in Europe led by solid performance in the UK and Germany. “We have made meaningful progress since announcing the initial steps of McDonald’s turnaround plan in early May,” said McDonald’s chief executive Steve Easterbrook. “To position the business for long-term growth, we’ve undergone significant organisational change and are streamlining our global resources to improve our efficiency and effectiveness. While our second quarter results were disappointing, we are seeing early signs of momentum. Looking ahead to third quarter, we expect positive global comparable sales led by growth in our newly-created International Lead Market segment and China’s continuing recovery from the 2014 APMEA supplier issue. I am confident that we will create the transformation necessary for McDonald’s to become a modern, progressive burger company delivering a contemporary restaurant experience.” In the US, second quarter comparable sales decreased 2%, reflecting negative guest traffic as the featured products and promotions did not achieve expected consumer response amid ongoing competitive activity. Operating income for the quarter decreased 6%, reflecting the soft, top-line performance. Going forward, local market tests around all-day breakfast and menu simplification will continue as part of the work underway to enhance the experience for over 25 million U.S. customers who visit McDonald’s each day. Europe’s second quarter comparable sales increased 1.2% driven by solid performance in the U.K. and Germany, partly offset by negative results in France. Second quarter operating income decreased 20% (2% in constant currencies) reflecting economic challenges in certain key markets and strategic charges associated with the global business turnaround plan. In APMEA, second quarter comparable sales decreased 4.5%, and operating income declined 26% (16% in constant currencies) primarily due to the impact of prolonged, broad-based consumer perception issues in Japan along with negative performance in China and other Asian markets, partly offset by strong performance in Australia. Kevin Ozan, McDonald’s chief financial officer, noted: “Our turnaround will be led by operational growth and supported by a comprehensive approach to financial management. The structural changes we are implementing, coupled with our plan to refranchise about 3,500 restaurants by the end of 2018 and achieve approximately $300m of net annual savings on selling, general and administrative expenses by the end of 2017, are designed to position us for future growth. We continue to evaluate additional ideas to further drive shareholder value through actions that deliver sustainable long-term growth.” Easterbrook added: “We begin third quarter under a new structure supported by market-level focus, stronger accountability and an unwavering emphasis on the basic fundamentals of running great restaurants. We are aligning our initiatives and resources behind longer-term strategic actions with the ability to drive meaningful improvements in our business. We have talented franchisees, suppliers and employees working together to create the change needed to deliver a better experience for our customers.” Consolidated revenues decreased by 10% (increase of 1% in constant currencies). There was a consolidated operating income decrease of 16% (6% in constant currencies), due in part to approximately $45m of restructuring charges incurred to optimise the Company’s global operating structure. Earnings per share were $1.26, a decrease of 10% (1% in constant currencies). It returned $2.5 billion to shareholders through share repurchases and dividends, bringing the year-to-date return to shareholders to $3.9 billion in connection with our 3-year target to return $18-20 billion to shareholders by the end of 2016.

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