As a result of the Covid-19 pandemic increasing costs and delaying recovery in international markets, McDonald's Corp. (MCD, Financial) reported disappointing fourth-quarter and full-year 2020 earnings before the opening bell on Thursday.
The iconic Chicago-based fast-food chain posted adjusted earnings of $1.70 per share for the quarter, missing Refinitiv's estimates of $1.78. Net income of $1.38 billion was down from $1.57 billion a year ago on the back of higher restaurant closing costs and lower gains on the sales of restaurant businesses.
Revenue for the three months ended Dec. 31 declined 2% from the prior-year quarter to $5.31 billion, shy of the $5.37 billion analysts were anticipating.
For the full year, McDonald's recorded earnings of $6.31 per share on $19.2 billion in revenue.
While worldwide same-store sales shrank 1.3% during the quarter, it was an improvement from the third quarter. U.S. same-store sales increased 5.5% on the back of marketing investments and promotional activity, marking the second straight quarter of positive results. For the full year, same-store sales rose 0.4%.
While McDonald's delivered its strongest quarter of the year, President and CEO Chris Kempczinski commented that "2020 will be remembered as one of McDonald's most challenging, yet inspiring, moments in our long history."
"The resilience of the McDonald's System was on display – making safety and service a priority, putting our customers and people first, and running great restaurants," he said. "Against an uncertain backdrop, we are committed to staying true to our values and our brand purpose to feed and foster communities."
The pandemic still took its toll on the company, however.
Same-store sales in its international operated markets, most notably France, Germany, Italy and Spain, fell 7.4% due to resurgences of the coronavirus, leading to further lockdowns in Europe. The U.K. and Australia, though, both reported positive comparable store sales growth.
McDonald's international developmental licensed markets fared a bit better, recording a 3.6% decline in comparable store sales. While Japan recorded strong same-store sales growth, it was offset by declining sales in Asia and Latin America.
Despite a disappointing performance, the company's guidance for 2021 is promising. McDonald's is expecting low double-digit system-wide sales growth for the year, rebounding to surpass 2019 sales. New restaurant units are projected to contribute about 1%. Capital expenditures are estimated to be $2.3 billion, of which about half will be spent on opening 500 new restaurants in the U.S. and internationally.
"By investing for the future and leveraging competitive strengths within our Accelerating the Arches strategy in drive-thru, delivery, and our growing digital presence, we're confident we can continue to capture market share and drive long-term sustainable growth for all stakeholders," Kempczinski said.
With a $156.23 billion market cap, shares of McDonald's were up 0.27% on Thursday at $207.57. GuruFocus estimates the stock has declined 0.83% over the past year.
Disclosure: No positions.
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