McDonald’s Corp. (MCD, Financial) reported impressive fourth-quarter earnings, beating analyst estimates. The company saw a drop in same-store sales in the U.S. however, igniting concerns among investors.
McDonald’s has been trying to revamp its menu to attract millennials and improve customer traffic. The company’s strategy to streamline the process and introduce new items to its menu produced positive results, but there is still a lot of work to do. Here is a look at the company’s performance.
A snapshot
For the fourth quarter, revenue stood at $6.03 billion, down 5% from last year. The currency fluctuation had an adverse impact on the revenue. On a constant-currency basis, the top-line declined only 3%. It should be noted, the revenue decline was narrower than what analysts had expected. Operating income for the quarter rose 5%. Net income came in at $1.2 billion, translating to an adjusted EPS of $1.44.
For the full year, McDonald’s reported revenue of $24.6 billion, down 3% when compared with 2015. Full-year EPS climbed 13% to $5.44. Net income stood at $4.69 billion, up 3% when compared with the previous year.
The company rewarded its shareholders in the fourth quarter by returning $2.2 billion through share buybacks and dividends. For the year, the company spent $14.2 billion in share buybacks and dividends, achieving its target of returning $30 billion to shareholders over a three-year period that ended in 2016.
CEO Steve Easterbrook applauded the company's results and revealed it had achieved its strongest annual global comparable sales growth since 2011.
"I am confident that we are on the right path as we pursue our goal of being recognized by our customers as the modern, progressive burger company," Easterbrook said.
Comparable store sales
As mentioned, McDonald’s recorded its highest annual worldwide same-store sales growth since 2011, spiking 2.7%. The strong growth is attributable to the strength seen in the U.K., China, Japan and some South American markets.
Over the past few years, McDonald’s has been striving to improve its menu and customer experience. Among the improvements were its introduction of all-day breakfast, making changes to the menu, improving the service and modifying the restaurants. As far as the fourth quarter is concered, these measures brought positive results.
Comparable store sales in the U.S. were not as positive however, dropping 1.3% for the quarter. Complex menu changes led to higher costs, which were not offset by customer traffic. Outside the U.S., things looked positive. Besides putting up a strong show in China, positive results in its high-growth segment led to a 4.7% surge in same-store sales for the quarter. Company executives made customer traffic growth one of its top priorities for the current year.
Last word
McDonald’s is confident it will reap the rewards of its efforts to bring about strong growth in the international market and rebound in its home market. Easterbrook believes refranchising efforts coupled with “financial discipline” will help the company achieve its long-term goals and deliver growth.
Disclosure: I do not hold any position in the stock mentioned in this article.
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