In a release before market open on July 29th 2024, McDonald’s Corporation, a bellwether for the QSR segment of the restaurant industry, reported results for the 3rd quarter of FY 2024 ending September 30th 2024.The Company beat estimates on earnings and sales growth.
For the period, the Company earned $2,255 million on total revenue of $6,872 million with a diluted EPS of $3.13. Comparable figures for the 3rd quarter of fiscal 2023 were net income of $2,317 million on total revenue of $6,692 million with a diluted EPS of $3.17.
Revenue for Q3 was 2.7 percent higher than Q3 FY 2023. Operating margin fell from 47.9 percent to 46.3 percent for the most recent quarter. Gross margin for Company-operated stores declined from 16.5 percent for Q3 FY 2023 to 15.4 percent suggesting acceptable control of costs for ingredients, packaging and rationalization of menus to offset increased labor cost. The Accelerating the Arches efficiency initiative, was unable to maintain traffic despite promotions. The Company may be benefitting from trade-down from restaurant dining in the demographic with an annual income of over $100,000. In contrast management are concerned over loss of traffic and check value among lower income customers
In commenting on results, Chris Kempczinski, president and CEO stated, “We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending,” Her added “McDonald’s will continue to follow our Accelerating the Arches playbook to drive long-term growth globally and win in this environment.” On the investors’ call Kempczinski apologized for the recent STEC outbreak and expressed hope for recovery among the 90 cases confirmed with the foodborne infection. He confirmed that the outbreak reduced customer count in the days following the announcement of the source of infection.
Kempczinski affirmed that the recent E.coli outbreak was over and the Company was moving forward to reestablish customer goodwill after a fall in foot traffic. The CEO also commented on the benefit of the $5 meal deal on sales especially to the low-income demographic
For Q3 FY 2024, McDonald’s posted an increase in comparable store sales in the U.S. of 0.3 percent with comparable store sales for the international operated markets segment down by 2.1 percent contributing to a global comparable store sales reduction of 1.5 percent. The International Developmental Licensed Market Segment posted a 3.5 percent decline in comparable sales due to turbulence in the Middle East although partly offset by gains in Latin America and Japan.
Projections for 2024 in the SEC 8-K report included net restaurant expansion contributing 2.0 percent to system-wide sales with an operating margin attaining a mid-to high 40 percent. Capital expenditure will range from $2.5 to $2.7 billion for 2,100 new stores with 500 in the U.S.
On September 30th 2024 there were 42,819 McDonald’s stores. Restaurant breakdown included 13,498, in the U.S.; 10,378 International-operated and 18,943, International Developmental Licensed locations. During 2024 the Company intends to open 1,600 new restaurants globally. According to the report most will be traditional in design but the Company will consider alternatives including a test of a small free-standing ‘CosMC’ format.
McDonald’s Corporation posted a market capitalization of $209,120 million on July 29th 2024. Total assets on December 31st 2023 amounted to $56,146 million of which 24.0 percent comprised lease right-of-use assets. Long-term debt and lease obligation were $50,211 million.
MCD has ranged over the past 52-weeks from $243.53 to $317.90 with a 50-day moving average of $298.21. MCD trades with a forward P/E ratio of 23.1. The 12-month trailing operating margin was 44.2 percent and profit margin, 31.8 percent. Prior to release MCD closed on Tuesday 29th at $297.02 but traded post-release on Wednesday 30th at $299.