McDonald's global comp sales rise, revenues fall in Q2
The company reported its financial results for the second quarter ended June 30, 2016.
“At McDonald’s, we are focused on meeting our customers’ needs for high quality, affordable food and beverage choices,” said McDonald’s President and Chief Executive Officer Steve Easterbrook.
“Our second quarter performance, which marks our fourth consecutive quarter of positive comparable sales across all business segments, provides a clear indication that customers are responding to the steps we’re taking to deliver the menu and value options they want at the convenience of McDonald’s. We’re making steady progress on transforming our business to satisfy the needs of our customers around the world, despite a challenging environment in several key markets.”
According to the results, global comparable sales for the fast food chain increased 3.1%, reflecting positive comparable sales in all segments. Due to the impact of refranchising, consolidated revenues decreased 4% (1% in constant currencies).
Consolidated operating income was relatively flat (increased 3% in constant currencies), which included approximately $230 million of previously announced strategic charges, consisting primarily of non-cash impairment charges related to the Company’s ongoing refranchising and G&A initiatives, as well as the decision to relocate the Company's headquarters.
In the U.S., second quarter comparable sales increased 1.8%, with continued contributions from All Day Breakfast and McPick 2 despite softening industry growth during the quarter. Operating income for the quarter rose 10%, reflecting higher sales-driven franchised margins and higher gains from restaurant refranchising. McDonald’s U.S. begins the second half of the year focused on adding more breakfast sandwich options - Biscuits, McMuffins and McGriddles - to the All Day Breakfast menu this fall.
Comparable sales for the International Lead segment increased 2.6% for the quarter, led by positive performance in the U.K., Canada and Australia, and slightly positive results in Germany. Operating income for the quarter increased 4% (7% in constant currencies), driven by improved franchised margins.
In the High Growth segment, second quarter comparable sales increased 1.6%, led by positive comparable sales performance in China and Russia, along with solid performance across various other markets. The segment’s operating income rose 25% (32% in constant currencies) fueled by improved results in China.
Second quarter comparable sales rose 7.7% in the Foundational markets, reflecting very strong performance in Japan and many other markets. For the segment, operating income for the quarter declined due to the impact of strategic charges associated with the Company’s ongoing refranchising and G&A initiatives.
Steve Easterbrook concluded, “Enhancing the customer experience, running great restaurants and strengthening our competitive position to become a modern progressive burger company takes discipline and dedication. I am confident in our System’s ability to stay the course and execute our turnaround plan to achieve our goals. We are on the right path to changing the way customers think about McDonald’s by getting closer to the communities we serve and harnessing one of our System's key competitive strengths - the entrepreneurial spirit of our dedicated franchisees - as we lay the foundation for future growth.”