McDonald’s half-year sees revenues down, but profit up

Beef Central, 27/07/2016

McDonald's ChinaMcDonald’s Corp, Australia’s biggest global beef customer, has reported worldwide global revenues for its first six months of its 2016 calendar year at US$12.2 billion, down 2 percent from the previous year.

Profits, however, were 10pc higher than last year’s equivalent period, at US$2.2b, as the company responds to its recent slump in sales and financial performance.

Results for the quarter and six months benefited from stronger operating performance and higher gains on sales of restaurant businesses.

McDonald’s chief executive Steve Easterbrook said the company’s second quarter ended June 30 marked its fourth consecutive quarter of positive comparable sales across all business segments, provided a clear indication that customers were responding to the steps taken to “deliver the menu and value options that customers wanted.”

“We’re making steady progress on transforming our business to satisfy the needs of our customers around the world, despite a challenging environment in several key markets,” he said.

Second quarter highlights included global comparable sales increase of 3.1pc, reflecting positive comparable sales in all segments. Revenues decreased 4pc due to the impact of refranchising.

In the company’s US division, accounting for 40pc of all sales, second quarter comparable sales increased 1.8pc, while operating income rose 10pc, reflecting higher sales-driven franchised margins and higher gains from restaurant refranchising.

Comparable sales for the company’s international division (well-established markets including Australia, Canada, France, Germany and the UK, accounting for 40pc of sales) increased 2.6pc for the quarter, led by positive performance in the UK, Canada and Australia, and slightly positive results in Germany. Operating income for the quarter increased 4pc, driven by improved franchised margins.

In McDonald’s High Growth division (relatively higher restaurant expansion and franchising potential including China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands, accounting for 10pc of sales), second quarter comparable sales increased 1.6pc, led by positive comparable sales performance in China and Russia, along with solid performance across various other markets. The segment’s operating income rose 25pc fuelled by improved results in China, as the market recovers from earlier food safety dramas.

“We are on the right path to changing the way customers think about McDonald’s by getting closer to the communities we serve and harnessing one of our system’s key competitive strengths – the entrepreneurial spirit of our dedicated franchisees – as we lay the foundation for future growth,” CEO Steve Easterbrook said.

“Enhancing the customer experience, running great restaurants and strengthening our competitive position to become a modern progressive burger company takes discipline and dedication. I am confident in our system’s ability to stay the course and execute our turnaround plan to achieve our goals,” he said.

McDonald’s last year announced a new worldwide regional business structure, as follows:

US division – the company’s largest segment, accounting for more than 40pc of 2015 operating income

International Lead Markets division – well-established markets including Australia, Canada, France, Germany and the UK, which operate within similar economic and competitive dynamics, offer similar growth opportunities and collectively represented about 40pc of 2015 operating income

High-Growth Markets – markets with relatively higher restaurant expansion and franchising potential including China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands. Together these markets accounted for 10pc of 2015 income; and

Foundational Markets – the remaining markets in the McDonald’s system, including Japan, each of which operates under a largely franchised model.




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