McDonald’s increases its focus on opening new locations.
This year, McDonald’s Corp. intends to construct hundreds of new restaurants across the globe, including its first new locations in the US in almost eight years. The president and CEO, Christopher J. Kempczinski, stated that the company’s excellent comparable sales and brand performance have “given us the right to build new units at a faster rate than we have historically.”
The fast-food chain announced that it would build about 1,900 outlets, more than 400 of which would be located in countries where it operates, including as Australia, Canada, France, Germany, and the United Kingdom. The remaining 1,500 eateries, which will include roughly 900 in China, will be spread throughout McDonald’s internationally developing licensed markets.
During a conference call on January 31 to report full-year and fourth-quarter financial results, Ian Frederick Borden, executive vice president and chief financial officer, stated, “I mean, 2014 was the last year that we actually grew restaurants in the US.” “So, for the past eight years, our main focus has been on a refurbishment program. And over that same time frame, I believe everyone would concur that our US business has improved greatly since then.
“You want to be growing units when you have strong comp sales because that reflects the underlying health of the business,” Mr. Kempczinski continued.
He declared, “I feel very good about the outlook.” “Therefore, I am now authorized to add some unit growth on top of that.” But where and how we do that deserve careful consideration. Additionally, I believe that at times in the past we looked at merely placing units and focusing on an absolute quantity rather than perhaps considering the site’s quality. Therefore, in order to ensure that we can continue to drive both comp sales and unit growth when we do roll it out, we want to spend some time this year to ensure that we feel confidence about the precise number, the pacing, and the quality of the site.
McDonald’s reported $6.2 billion in net income, or $8.33 per share, for the fiscal year that ended on December 31, 2022. This represents an 18% decrease from the previous year’s net income of $7.5 billion, or $10.04 per share. The company’s recent year’s results showed a gain of $271 million from the sale of its Dynamic Yield business, offset by $1.3 billion in charges associated with the sale of its Russia business. The previous year’s results showed $54 million in costs associated with the sale of McD Tech Labs, $339 million in net gains from the sale of McDonald’s Japan equity, and $364 million in income tax benefits.
Revenues for the full year totaled $23.2 billion, even with the prior year and up 6% in constant currencies.
For the full year, global comparable sales increased 11%, reflecting growth across all segments. US comparable sales climbed 5.9%, while international operated markets and international developmental licensed markets segments grew 13% and 16%, respectively.
Fourth-quarter net income advanced 16% to $1.9 billion, equal to $2.59 per share, which compared with $1.6 billion, or $2.18 per share, in the prior-year period.
Revenues for the fourth quarter declined 1% to $5.9 billion from $6 billion. In constant currencies, revenues increased 5%.
Global comparable sales in the fourth quarter increased 13%, driven by 10% growth in US comparable sales, 13% growth in international operated markets and 17% growth in international developmental licensed markets.
Mr. Kempczinski stated, “Looking just at the US, I believe what we saw from a performance standpoint was very balanced growth across the dayparts.” We still have opportunities for late nights because of the adjustments we’ve made to our operation hours because of the staffing situation. However, that has been particularly robust around our main dayparts.
Additionally, our main menu is expanding rapidly. In particular, we are gaining a significant amount of market share in the chicken category. In the past year, we have increased our share of chicken by roughly 1 point. Furthermore, even though we already have a significant position in the beef market, we are still increasing our share of that as well.
He noted lower-income consumers are visiting McDonald’s restaurants more frequently while spending less per trip. And while executives expect inflationary costs to persist in the year ahead, Mr. Kempczinski said the company will maintain a “disciplined approach to pricing” to protect its position on value with consumers.
“Our positive guest count performance in 2022 demonstrates our success so far in balancing these competing demands, and we need to remain judicious with pricing actions,” he said.
Management’s growth plans for the year failed to impress investors. McDonald’s share price closed at $267.40 on Jan. 31, down 1.3% from the day before.