McDonald's earnings: Sales are still growing but not as much as Wall Street expected
McDonald's reported same-store sales that missed Wall Street's expectations.
McDonald’s (MCD) fans are still showing up for their Big Macs — but not as much as Wall Street thought.
The company, which reported its Q4 results on Feb. 5, posted global same-store sales growth of 3.4%, lower than the expected 4.79% jump. Its US sales growth clocked in at 4.3%, under the 4.45% increase Wall Street anticipated.
That's in contrast to Q3, where overall same-store sales increased 8.8%, beating analyst estimates at the time.
In the fourth quarter, adjusted earnings per share increased 18% to $2.95, higher than the $2.82 expected, while total revenue jumped 8% to $6.41 billion.
For fiscal 2023, McDonald's reported $25.49 billion in total revenue, up 10% from $23.18 billion in 2022.
CEO Chris Kempczinski acknowledged the current consumer environment in the earnings release: "We remain confident in the resilience of our business amid macro challenges that will persist in 2024."
He also alluded to McDonald's growth plan Accelerating the Arches, saying the strategy "has driven over 30% [of same-store sales] growth since 2019."
In the US, Q4 sales growth was driven by larger check sizes and increased menu prices, in addition to marketing campaigns like the return of the McNugget Buddies and Happy Meal Squishmallows. For the full fiscal year, sales in the US jumped 8.7%.
In its internationally operated markets, Q4 same-store sales increased 4.4%, down from the 12.6% growth McDonald's saw a year ago.
In its international licensed markets like Latin America and Asia, same-store sales were up only 0.7%, compared to an increase of 16.5% in Q4 2022. McDonald's said sales in that segment were affected by the war in the Middle East.
In early January, Kempczinski wrote in a LinkedIn post that "several markets in the Middle East and some outside the region are experiencing a meaningful business impact due to the war and associated misinformation that is affecting brands like McDonald’s."
McDonald's loyalty program was key to its performance. In Q4, loyalty members brought in $6 billion in sales across 50 markets and more than $20 billion across fiscal 2023, a 45% jump from 2022.
Prior to the results, Wall Street seemed bullish on the stock.
While fast food stocks were hammered in 2023 amid fears of softening consumer sentiment, higher food inflation like beef (which may not improve soon given a low supply of cattle), and the potential impact of weight-loss drugs, McDonald's seemed to find a way to forge ahead.
It's "hard to see McDonald's not ‘winning’ in any consumer environment,” Wedbush analyst Nick Setyan wrote in a client note. He projected sustained same-store sales growth in the near term, driven by menu pricing and innovation, loyalty programs, effective marketing, and operational execution and efficiencies.
Jefferies’ Andy Barish named the stock a top pick in 2024, calling it the "best defensive and offensive play in restaurants," with "resiliency in an uncertain or weak macro [environment]." Barish expects the chain to further invest in digital, delivery, drive-through, and chicken products.
McDonald's has been cooking up a sizzling growth plan. During its Investor Day last December, it announced a record expansion to 50,000 locations by 2027, and growing its loyalty program from 150 million to 250 million members.
The chain currently has more than 40,000 locations, with more than 39,000 of those owned by franchisees.
Earnings breakdown
Here's what McDonald's reported in Q4, compared to Wall Street's expectations, per Bloomberg consensus data:
Revenue: $6.41 billion versus $6.45 billion expected
Adjusted EPS: $2.95 versus $2.82 expected
Global same-store sales growth: 3.4% versus 4.79% expected
US same-store sales growth: 4.3% versus 4.45% expected
International operated markets same-store sales growth: 4.4% versus 5.03% expected
International developed licensed markets same-store sales growth: 0.7% versus 5.06% expected
Here's what McDonald's reported for fiscal 2023, compared to Wall Street's expectations, per Bloomberg consensus data:
Revenue: $25.49 billion versus $25.53 billion expected
Adjusted EPS: $11.94 per share versus $11.78 per share expected
Global same-store sales growth: 9.0% versus 9.41% expected
US same-store sales growth: 8.7% versus 8.81% expected
International operated markets same-store sales growth: 9.2% versus 9.53% expected
International developed licensed markets same-store sales growth: 9.4% versus 10.51% expected
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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