• Global Comp Sales: Declined by 1% in the first quarter.
• US Comp Sales: Declined 3.6% due to broad-based consumer challenges.
• Adjusted Earnings Per Share: $2.67 for the quarter, a 1% increase in constant currencies.
• Restaurant Margins: Generated over $3.3 billion for the quarter.
• Adjusted Operating Margin: Approximately 45.5%.
• International Developmental Licensed Markets Comp Sales: Increased by 3.5%, driven by positive results in the Middle East and Japan.
• Foreign Currency Translation Impact: $0.04 headwind on earnings per share.

• Warning! GuruFocus has detected 2 Warning Sign with AME.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• McDonald's Corp (NYSE:MCD) has launched a new McValue platform in the US, which includes a $5 meal deal that has resonated well with customers.
• The company has introduced exciting new menu items, such as McCrispy Chicken Strips, which are expected to drive growth.
• McDonald's Corp (NYSE:MCD) has achieved all-time high customer satisfaction scores in the US, indicating strong operational execution.
• The Minecraft movie marketing campaign was a success, with collectibles selling out faster than anticipated, demonstrating effective promotional strategies.
• The company is focusing on beverages as a growth area, with plans to expand its offerings and capture a larger share of the profit pool in this category.

Negative Points

• Global comp sales declined by 1% in the first quarter, with a 3.6% decline in the US, reflecting broad-based consumer challenges.
• Traffic from low- and middle-income consumers in the US has significantly decreased, indicating economic pressures on these cohorts.
• The UK market is not yet gaining share, and execution improvements are needed to address this issue.
• The company faces a more inflationary environment in Europe, particularly due to beef prices, which impacts profitability.
• Despite the success of the McValue platform, the buy-one-add-one-for-a-dollar component is not driving as much incrementality as expected.

Q & A Highlights

Q: Can you discuss the recent US sales trajectory and momentum, considering the consumer pressures and the impact of the Minecraft marketing campaign? A: Christopher Kempczinski, CEO, noted that the year is evolving as expected, with Q1 being the toughest quarter. The Minecraft promotion exceeded expectations, selling out collectibles in 10-14 days. The focus now is on execution, especially in a pressured consumer environment, to drive growth through value programs, marketing, and menu innovation.

Q: How do the consumer dynamics and McDonald's value perception differ in key international markets compared to the US? A: Kempczinski highlighted that Europe is challenging due to high inflation, particularly in beef. However, strong value programs and marketing can drive performance. In China, the business has stabilized, and Japan is performing solidly. The US faces significant pressure from low-income consumers, with traffic declines nearly 10%.

Q: How is the US McValue platform performing, and are adjustments needed? A: Kempczinski explained that the McValue platform is designed to be agile. The $5 meal deal is performing well, driving significant incrementality. However, the "buy one, add one for a dollar" component is not as incremental, and adjustments may be considered to enhance performance.

Q: With mid-single-digit menu pricing in the US, how do you manage the spread between value and premium offerings? A: Kempczinski emphasized the importance of balancing strong value programs with full-margin marketing and menu innovation. The focus is on disciplined pricing and ensuring that the overall P&L works for both franchisees and the company.

Q: Are there any signs of international boycotts affecting McDonald's, and how are you addressing this? A: Kempczinski stated that surveys show no change in consumer sentiment towards McDonald's despite some anti-American sentiment. The brand remains strong globally, with no impact on business. The franchise model, with local operators, helps adapt to cultural nuances.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.