McDonald's highlights challenging conditions at Q3 earnings report

 McDonald's

McDonald's highlights challenging conditions at Q3 earnings report

McDonald's Corporation Friday announced results for the third quarter ended September 30, 2012.

In constant currencies, the Company posted higher revenues and earnings per share compared with the prior year while operating income was flat.

On an as reported basis, revenues were relatively flat and operating income and earnings per share decreased, reflecting the impact of foreign currency translation.

"While our sales momentum and current financial results reflect today's challenging conditions, we continue to see significant long-term opportunities for brand McDonald's and remain confident in the underlying strength of our business model,"said McDonald's Chief Executive Officer Don Thompson.

"We have the right plans in place to drive long-term profitable growth along with the experience and alignment throughout the McDonald's System to navigate the current environment. We expect near-term top- and bottom-line growth to remain pressured as we focus on driving guest traffic and market share by leveraging our strategies and competitive advantages in response to the global economic, operating and competitive challenges. As we begin fourth quarter, October's global comparable sales are currently trending negative."

Third Quarter highlights included:
  • Global comparable sales increased 1.9%, with positive comparable sales in each geographic segment
  • Consolidated revenues of $7.2 billion were relatively flat compared with the prior year (up 4% in constant currencies)
  • Consolidated operating income of $2.3 billion decreased 4% (flat in constant currencies)
  • Diluted earnings per share of $1.43, down 1% (up 4% in constant currencies), including $0.08 per share of negative currency impact
  • Returned $1.3 billion to shareholders through share repurchases and dividends
McDonald's U.S. posted a comparable sales increase of 1.2% for the third quarter amid broad competitive activity. During the quarter, the U.S. showcased beverages, breakfast and classic core favorites, featured everyday value and continued to upgrade McDonald's existing restaurant base with fresh, modern designs. Operating income for the quarter declined 1%.

During third quarter, Europe generated comparable sales growth of 1.8% and delivered market share gains despite negative guest traffic. Europe's operating income decreased 7% for the quarter (increased 3% in constant currencies). Comparable sales and operating income in Russia, the U.K. and France led the segment's results, partially offset by Germany. Throughout Europe, premium food events, emphasis on everyday value and the ongoing benefits of reimaged restaurants supported the segment's results.

In Asia/Pacific, Middle East and Africa (APMEA), comparable sales increased 1.4% for the quarter as limited-time offers, featured alongside classic core favorites and unique value platforms, attracted more customers to McDonald's. APMEA's operating income increased 3% (4% in constant currencies) as solid comparable sales and operating income performance in China and Australia were partly offset by ongoing weakness in Japan and other markets.

Don Thompson concluded, "The McDonald's System remains focused on building the business for the long-term by meeting the evolving needs of our customers. We continue to execute against our global priorities of optimizing our menu, modernizing the customer experience and broadening accessibility under the Plan to Win while implementing near-term tactical shifts to build momentum, enhance the relevance of our brand and deliver increased value to the McDonald's System and our shareholders."
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