McDonald’s weathers GFC storm better than most

Jon Condon, 25/07/2012


Burger giant McDonald’s is riding out the current gloomy global economic climate better than most, delivering a June quarter result that showed higher revenues, operating income and earnings per share compared with the same period last year.

It’s been a constant mantra since the onset of the Global Financial Crisis that consumers everywhere are ‘trading down’ in terms of their food service expenditure, and quick service restaurant companies reliant on cheaper grinding beef, like McDonalds, are the big beneficiaries of that trend.

As recently as last week, MLA’s half year projections again made the point that “since the onset of the GFC in mid-2008, the troubled outlook for many of the world’s advanced economies has plagued consumer sentiment and spending.”

“Consumers continue to favour cheaper-priced products as they to trade-down in their purchasing preferences,” the report said.  

Measured in constant currencies, McDonald’s June quarter was higher in revenue, operating income and earnings compared with the previous year, but when currency movement was overlaid on that, operating income and earnings per share both eased.

"McDonald's global comparable sales remained solid for the quarter while overall results reflected the slowing global economy and persistent economic headwinds," McDonald's newly installed chief executive Don Thompson told shareholders.

Global comparable sales increased 3.7pc, with positive gains in each geographic region where the company operates. Consolidated revenues of $6.9 billion were flat compared with the same quarter a year ago, but up 5pc in constant currencies. Consolidated operating income of $2.2 billion decreased 2pc, but again, was up 3pc in constant currencies.

At a regional level:

  • McDonald's US generated comparable sales growth of 3.6pc for the quarter, while operating income for the quarter increased 2pc.
  • The company's European division produced comparable sales growth of 3.8pc while operating income decreased 3pc. Ongoing strength was seen in the UK and Russian businesses, with France and Germany also contributing.
  • In the Asia/Pacific, Middle East and Africa (APMEA) region, a modest comparable sales increase of 0.9pc was posted for the quarter, with operating income decreasing 2pc. Solid performance was seen in Australia and China, partly driven by positive consumer response to value platforms, while weakness was seen in Japan.

While global comparable sales for July are expected to be positive, the company’s forecast for the September quarter is below the quarter just completed.

Mr Thompson said while the trading environment had become more challenging, the company continued to see significant opportunities to further differentiate and grow the McDonald's brand. 

With 33,000 stores worldwide, McDonald's is often seen as a bellweather company for broader industry trends.


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