McDonald's $MCD (-0,03Â %) has published its figures for Q4 2024 and failed to meet expectations. The US business was particularly disappointing with a -1.4 % decline in sales in Q4, which was mainly due to an E. coli outbreak caused by contaminated onions on Quarter Pounders.
đQ4 vs. estimates [1]:
Sales: $6.39 billion vs. $6.48 billion -> â -1.4 %
EBIT: $2.87 billion vs. $2.94 billion -> â -2.3 %
EPS: $2.83 (adjusted) vs. $2.86 -> â -1.0%
Despite the earnings miss, McDonald's shares rose by 4.73% in pre-market trading. This move suggests that investors may have been encouraged by other aspects of the company's performance or strategic outlook, such as its strong digital growth and expansion plans [2].
đ Comparable sales vs. systemwide sales Q4 and FY2024 [1, 3]
Comparable Sales (comparable sales figures):
- These are sales from existing restaurants that have been open for at least 13 months. They show organic growth without the effect of new locations.
Q4 2024: +0.4 % worldwide
- USA-1.4 % (decline due to E. coli incident and weak consumer demand)
- International Operated Markets (IOM*): +0.1 % (weak growth, particularly in the UK)
* Countries and regions in which McDonalds itself is more heavily involved (e.g. Germany, UK, France)
- International Developmental Licensed Markets (IDL*): +4.1 % (strong growth, led by Japan & Middle East)
* Countries and regions in which McDonalds does not operate its restaurants itself, but licenses local partners and McD. also receives its revenue share and fees
Full year 2024: -0.1 % worldwide
- USA: +0,2 %
- IOM: -0,2 %
- IDL: -0,3 %
Conclusion:
The license markets showed strong growth in Q4 (+4.1 %), while the USA (-1.4 %) and Europe (IOM +0.1 %) stagnated. Over the year as a whole, however, comparable sales remained slightly negative worldwide (-0.1%).
Systemwide sales (system-wide sales):
This comprises the total sales of all McDonald's restaurants, i.e. both existing and new locations, regardless of whether they are operated by McDonald's itself or by franchise partners.
Q4 2024+2 % worldwide
Full year 2024: +1 % worldwide
Conclusion:
Growth in system sales was higher than in comparable sales, as McDonald's expanded worldwide and opened new stores.
đ How McDonald's plans to grow again in 2025 [3]:
More restaurants worldwide:
- 2,200 new locations are planned, with capital expenditure of between 3.0 and 3.2 billion US dollars.
- Of these, 1,600 will be in licensed markets, i.e. in countries where McDonald's licenses its restaurants to local partners and does not operate them itself.
- 1,000 of these in China alone.
- Net growth: 1,800 new restaurants (new openings minus closures).
- McDonald's is also aiming to reach 50,000 restaurants by the end of 2027.
More investment in technology & digitalization:
- Global Business Services (GBS): McDonald's is centralizing accounting, IT and marketing for several countries. This centralized management saves costs and increases efficiency.
- More focus on mobile orders & loyalty programs:
- Sales with loyalty customers increased by 30% to $30 billion in 2024, 175 million active users in the last 90 days use the program, which helps stabilize sales and gain market share.
- The number of active digital users is expected to increase to 250 million in 2025
Increasing investments (CapEx = Capital Expenditures):
- More money for new stores, remodeling and digital offerings.
- Annual increase in investment of $300-500 million by 2027.
Aiming for higher profits:
- Adjusted operating margin was 46.3 % in 2024, McDonald's plans to further increase the operating margin of 46.3 % in 2025.
Capital returns to investors:
- Dividends remain stable.
- Share buybacks with excess cash flow stabilize the share price.
Outlook Q1 - 2025 [4]:
đ Risks and challenges
- Economic pressure on consumer spending, particularly in Europe.
- Challenges in maintaining growth in a highly competitive quick service restaurant (QSR) industry.
- Potential currency risks impacting earnings.
- Managing the recovery from the recent E. coli incident in the US.
- Navigating market saturation and operational efficiencies in global markets.
đ Overall conclusion
McDonald's maintained a strong adjusted operating margin of 46.3%. Despite challenges in consumer spending, particularly in Europe, McDonald's outperformed the competition in key markets such as France, Spain and Germany, mainly thanks to its robust digital and loyalty programs [3].
McDonald's had short-term problems in 2024 (especially in the US), but is focusing on long-term growth with:
- Expansion in Asia, especially China.
- More digitalization & stronger customer loyalty through the successful loyalty program.
- More efficient business structures (via GBS) and better margins.
I personally hold my position and think that the upcoming challenge for the company can be mastered đđ
Thank you for reading! đ€
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Sources:
[1] https://corporate.mcdonalds.com/content/dam/sites/corp/nfl/pdf/MCD-Q4-24-Earnings-Release.pdf
[3] https://web.quartr.com/pressreleases/2209628