MCD - Earnings call 4 2023 | McDonald's Corporation

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Operator

Hello, and welcome to McDonald's Fourth Quarter 2023 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Mike Cieplak, Investor Relations Officer for McDonald's Corporation. Mr. begin. may you Cieplak,

Mike Cieplak

and call for Chief today and Ian Chris everyone, me Executive us. on Kempczinski; Borden. Officer, Financial the are Chief thank morning, joining you With Officer, Good President and

their statements forward-looking apply measures reconciliations of GAAP of as also comments corresponding those the reminder, are our along on a in earnings today's on X-K to today. release call the financial are available any mentioned our call, on documents non-GAAP filing and Both with measures. website As our

Following this [Operator we is take Instructions] replay now will Today's recorded Chris. and to And via being prepared webcast I'll morning, remarks over your turn our website. call questions. is also it for being

Christopher Kempczinski

year, continued we environment, that challenging and operating deliver growth. a to shared you, morning, we good gathered last Thank despite McDonald's high When everyone. levels historically of at time this

XXXX, position persisted on into and While a in full throughout and of was the we display macroeconomic the are heading of our year system resilience pressures strength. new power

of dedication unwavering network local and an our suppliers McDonald's talented serving with around restaurants, executing of million XXXX, across major world, we nearly excellence and system. to a positive most market our global with across X%, in and results of These world-class tireless the the entire people segments globally, X% our performance the growth franchisees traffic guest share sales count communities. credit of working The X over maintained delivered to our our industry's of our of with and leading commitment In are the markets. each best comp customers achieved all

focusing increased major delivered improvements, exceptional across all customer on improved restaurants, service our fundamentals the in an has and of operational of customer satisfaction almost times markets. experience And creating our

response growth and remain in since Our over strategy MCD comparable enable pillars to working, fueling our agile changing XXXX, us customer to growth is sales XX% Accelerating Arches needs.

in annual and the XXXX. in loyalty loyalty billion over XX system-wide markets reached expanded $XX we've example, around sales to world For

in user XX million with making loyalty one to active us over last the base been the largest have continues days, XXX world. in the Our grow programs users that of

years, chicken the chicken a in Over McCrispy, high-quality sandwich. globally we've tremendous X growth consistent by also delivered last developing

of and solving it across markets more in markets across first a the need brand has XX the to billion goal system, unmet was this a customer worldwide. tested With and quickly scaled developed $X than few

beef. The operate Our year category with new $XX billion billion annual indexes. McDonald's on opportunity chicken ago, quickly formed McDonald's. start-up core in top business represents beverage-led a occasions as of our business an And within identified an in system-wide our a to designed now where team sales we a $XXX X under team that about entrepreneurial category par ventures markets across comprise

opened the the a a team little has electric. In year, buzz COSMIC than and restaurant a been less pilot

innovate let our Now more say are learn XX-store test, we're we and me to about about says potential again, excited But test. than what this this only about quickly. a talking that,

reduce more our have customers. of complexity markets a our innovative year, macroeconomic how And visit to ATO had decision-making. past Each Accelerating what the resilience Organization landscape innovation over the the and identify modernize ability an year, I've an also matter gives surprise more so or the in new world, efficient. as of lead the we delight that to where way take in goes empowered to It customer right adopt principles teams effort to I've work to the faster, of we're risk, the and around these may witnessed opportunity as and ways In our the and implemented us no the examples the amount incredible last bring. next opportunities illustrate system we

firsthand witnessed recently of as I and a and part The can ready unlocking with I team across is system speed full unit the digital, leadership and the senior that office, the embraced value. customer This sharing of business platform on driving field Salt the City, Denver whole lifetime how power Some knowledge visited is customers. our of has take to which means arrival. advantage frequency drive restaurants of maximizing and engagement our Lake

right to the XX-second by and in a hotter. curbside to In these where addition the deliver restaurant crew ready-on-arrival for to food reduction national our in customer giving pick times right wait information that satisfaction transactions, restaurant in benefits up person average the in customers faster the higher

franchisees result, guest we've a higher franchisee of are and in cash growth As complexity levels reduced flow. restaurants Lake count driving Salt and and stress

local By implementing intuitive breadth and and and to full when more organization our Way decisions. global at teams removing is the much power global forefront small McDonald's thousands that One advantage, owners collaborating competitive our we critical our of restaurants between a layers communities. the within making is skills to a experiences And as by resources, business that is this McDonald's as business of people their approach, bring the scale and employ are run across the core,

our support on last or in the McDonald's impact is challenging war in most times. the struck our focus our positive steadfast Middle franchisees And whether a communities of Japan, we the in tragedies the year of that and Morocco recent our in been the in the was serve. East, communities Since brand's beginning earthquake it have history, creating Hawaii in the the

locally than that than a creating local of employees Across We're valuable McDonald's is the footprint. at restaurant for our and owned major both XXX,XXX than more grow in jobs segment, suppliers. local to XX more IDL citizens, office in employer opportunities more career X,XXX proud markets and

X children the House In And provide for jobs for alone. over across creating opened families XX,XXX purities this this restaurants people for McDonald's of essential care, to year need XXX,XXX IDL every new nearly new services removing helped an average single by barriers segment segment. health XXXX, Ronald day, who

the in that to be is priority safe. our are the business, recognize #X XXX,XXX For workers by communities our to the people ongoing around these communities led on Middle continue Europe, serve war of impacted them always and beacon franchisees local ill McDonald's time. thoughts impact our the The our tirelessly local world, at businesses keeping a the this support. We and East franchisees over worked and is region founded. their tragically war and in by has and who in our with disheartening Africa been families

of value state, been there's feel a And about McDonald's our the we our As to our entire Thinking better open doors but as can't the part McDonald's. help time to and on always XXXX, pride system. think never lies McDonald's will I in proudly ahead, ambitions back tremendous that potential brand everyone. be

will is our significant and still our sights in we Accelerating there say, the Arches As believe higher. runway continue strategy even to I we're setting

first, speak in through I'll it I'll Ian more to few talk minutes, turn a ahead QX the but over to results. our on year

Ian Borden

Thanks, and good morning, everyone.

the putting As deliver make, Chris decision the each center the every customer strategy environment an affordable with Accelerating and delicious moments mentioned acting we is at feel day. just to at of agility few core Arches minutes to good price ago, a every any in

macro challenges. exceptional Our remains our and quarter making over again X% over clear X% strategy, X and segments result comp sales that direct U.S. performance globally the it once resilient ongoing against pressures of this execution IOM in business is despite a of and both

This As remain and by and was in with our in challenging first past impacted we've no East. quarter the navigated the communities thoughts countless system, environment we the families since Middle opened a exception, XXXX. war our doors

our our and model the X%. in of sales from Chris sales provides than both As before, resulting impacted less the negative have impact business has war I fourth this, Despite performance, mentioned in meaningfully in segment IDL P&L stability our region. quarter comp the

strategic size, geographic Among as of scale many the to are McDonald's resilience advantages our incredible diversity, system. a and translating

local in work to which closely partners people we and supporting our the in stay the We communities with we operate will on continue region. IDL our focused as

up are to our extremely and the comes customers brand the every the continues when strength of the time proud corner together. show world, way system system highlighting again, in McDonald's for time We our of of consistently

their customers consumer. has with spending, been as our always our consumers it's and lower-income on the particularly even options more core affordable feel important to Providing pressure brand,

money We continue our evolving maintaining to in listen perceptions to value affordability. value by and our offerings, for customers strong

the coffee Canada, share critical in quarter, followed contributing and sales. for to to market bundles offer gains during a daypart Only a meals smaller app, this few daypart helping and for at mobile value as drive hot during further similar bundle an morning U.K. affordable The example, for pounds. great maintained a available Saver a deals McDonald's breakfast. their cemented pairing providing loyalty this their to while playbook great McMuffin food expanding increased just through by our U.K. destination

combination engagement to in-app through exclusive to interactive prices experience of market successful spirit of the of McDonald's brand create with digital also a wins, deals, its leaned monthly an festive daily an high elevated combined with active for million strength merchandise, calendar a the U.K. the connecting generated fun X all-time into customers. and proven promotion. compelling marketing boosted Festive holiday customers holiday and The the Through wins that and history with

menu days, deals on the most promotion, Australia, And From back where in its enjoyed available daily discounts XX app. iconic a Macca's in the My brought our market XX customers deal items market. record in Big loyalty remarkable meal drove unique or number to a and active like the French contributed of the Fries, the deals, Cheeseburger to Mac, promotion world-famous engagement our exclusive members

proposition elevating highly constantly of experience, learnings to enhancing brand. price across and This as affordable markets globe was the overall an love maintaining fans our the from many the this again interactive for Beyond campaigns offered once the value igniting McDonald's. we're evident McDonald's quarter, leveraging Monopoly point, create

tapped double offering The to to the core excitement by achieved weeks while time mobile in results giving market a full the by customers market the win generating app love. the app chance second year of The into that in X sales. game practices XXX,XXX option best just a Monopoly record-setting The driving first qualities this continued for significant those in the market display lifts Canadian customer amplify our was customers app. new global and customers and experience with digital nearly maintaining peal on

during than That's more more of were fact, population Canada. the digitally Monopoly than codes In XX redeemed promotion. million entire the

mobile rewarding digital and record-breaking first loyalty game scan registrations peel by time, with the Germany the prizes, customer in pieces Monopoly for offered the additional experienced iconic with also Germany driving to And app. as off their program customers our frequency. win points to prices combining ability

loyalty And Monopoly customers. sales for an our redemption interactive with additional France, drove experience in

market, softened and to negative for operating environment continue have difficult navigate quarter. results were the sales in We a the comp where

with forward, the Moving who confident our restoring reset we're the with foundation. leadership I strong to right we experience franchisees to committed our know place are right that have team in

urgency core critical areas with delivery. in a mindset our acting are value, address a to of like growth and We sense maintaining and opportunities menu

brand drive to ways. Way to building and Our approach in customers strength crew Monopoly beyond exciting McDonald's as continue and extends our and new One with cultural marketing relevance we connecting

This recreated quarter, the a our we featuring once as and enjoying our adult the of Meal McDonald's it for again nostalgic Happy fans tapped center. menu experience at core favorites into a kid

many the this artists across our to up evident, and in market additional promotion, in the engagement Canada. we a full U.S. campaign event return check was to our creator, trade customers launched encouraging a including to And scaling Kerwin we line strong lift. in driving top with with media fueled for growth channels. Originally by of markets, with social margin a it brought significant average XX the partnering of the The and XXXX, December, excitement back Frost,

each have familiar looking brands. X items favorites, $XX In different portfolio own center right, beloved. including been an of an their those in more never core chicken core iconic relevant menu, our $X environment to equities our billion menu where are brands, of the brands or billion are that At customers

to reputation continue aggressive quarter. further progress developing our for stay towards great of chicken We a on chicken. making this ambition

core additional by the Smokehouse, sales Sandwich exciting Germany McCrispy built new And in results our the Chicken product. brand the with market offering, and in leadership a lift with chicken limited strong on sandwich building driving and customer time extending offerings. affinity chicken the rehit flavors chicken its a the ingredients for U.K. combining McCrispy with and McCrispy

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to P&L. Turning our

constant for XX% Our top in drove over earnings per growth currencies. is of year of line an This adjusted the share prior the $X.XX increase quarter.

of write-offs impaired $XXX Excluding current no of million Accelerating software the year growth longer to and Arches almost use related strategy. charges charges for in our

results by fourth Foreign positively share. impacted translation $X.XX per currency quarter

XX%, restaurant of pressures about discussed margin generated margin for adjusted segments. just the currency. billion all year, increase margin dollars reflecting over For year, across that line P&L the results was operating of the we've XX% restaurant full top the constant an in significant $XX Despite higher year, throughout

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Christopher Kempczinski

Ian. Thanks,

more confidence, that expect a their know be rooted discriminating our perspective, growth adapt is we As focus our business. we any to our will to our we MCDs But XXXX, to drive will absolute on continue across look with resilience consumer we elevated and in our environment. in dollars. And from muted continue consumers believe with to ability historical prices

marketing one and ideas people at and an investment us. up the through customers price processes McDonald's meals is By common us that globally return affordable brands, a showing and of help will what a continue and to where approach recognized light about providing to One world's creative we and shine building scale on on love that need tools the most excellence, McDonald's. Way maximize most best delicious McDonald's beloved when and

that environment we're into by advantage. and McDonald's and our rituals with position behaviors value tapping moments that is brand. connected creative an people We're remaining memories, bold culture embraces to have a on creating competitive the And

insights, customer price customer optimizing rooted strategy the we in and With resistance. limiting behaviors are while

fans, pricing digital As get loyalty our our of offers them we and with tailor personalized. millions even our even can members, continue to making more we smarter new attract methodology to

now even ahead, Best With we'll small up to that also changes deploys XXXX. Looking more growth all the more like is by we're Burger continue enticing. the are about adding as and core than Best U.S., are made that make menu we've potential differences to noticing. deployed markets, nearly for really big across customers markets including XX excited initiatives our it to Burger, our

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the markets programs the years, For will in users of world a built a on arrival of our fraction few expand in X active only largest top while XXXX. example, end one of XXX represents loyalty over we total today the by customers. And our across million ready just

that's to investor We largest update, system-wide aim over X And our we're next as by and store U.S. across our compelling by during know XX,XXX with identified opportunity, where million XXX users loyalty and key segments, areas the both end end planning our and sales the growth we've population $XX you reach grow is done years. reach ambition homework. heard billion is of starting. IOM faster XXXX in restaurant We our density and to of the the and company to XXXX. active annual lower restaurants world's high even We've a

build plan the us near in customers. accelerating X generation arches term solidify platforms we've of before stay culture step we introduced compelling. advantages, competitive in part to our ahead on of McDonald's opportunities place the the and long-term will and leadership of are These cement as one But digital our new position, that growth for become next

to that platforms restaurant technology loyalty puts of the better and and for company experience hands in unlocks restaurant customers easiest one the our consumer highly our digital that a and The the This largest most drives and teams our intuitive and includes of retain and innovation. in building efficient customers. valuable both platform world attract a and operating crew speed platform

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program and have they better that they matter with to consistent we our ensuring offers provide and building or across loyalty more they that where we a single data no the we relationships For customers, every familiar, experience our customers serve the will how experiences, go day leverage personalized enjoy targeted were.

investing accurate is faster. teams the enable orders processes in it's them serving even the our to be company, restaurant, to For systems, to and intuitive and and customers more will it amazing empowers while with hot agility. technology and that provide to people that speed our tools the their hospitality for And jobs put and the efficient easier makes hands building most of restaurant innovate

to XXXX where power back I'll will unleash scale over As changing it our the has Ian stay outlook. be. tomorrow of but restaurant engine always now on the We're ability needs that our what bold turn strength said a full our our success talk to ability before, financial counts. it these depended I've customers' plans, to while McDonald's ahead to our building can global are reimagining through of

Ian Borden

Thanks, Chris.

levels varying our with As we've headwinds a markets. discussed, operate in to of we challenging environment continue across

our year, in war the dynamics continue weigh to the Middle these results along this as both with and macro will anticipate current to continue headwinds East. our on consumers ahead business we Looking the

navigate growing to As challenges, we highest the execute towards with ongoing critical. laser market focus share level these at continuing be will a

X% sales comp success X had of we broad-based years, of last compared with return expectations strong XXXX historical of in to level moderate comp our XXXX. growth IOM will anticipate the clear mentioned sales more we've over It's closer It's continue global and But and that before, X% truly we as normalized segments. to remarkable. growth we've over XX% exceptional momentum between with averages to as a U.S. to and when

to is expect see do there Middle we East. IDL, the in not meaningful resolution until improvement in And a

in in XXXX, our with growth nearly XX,XXX XXXX, contribute expect will development opened restaurant restaurants begin We restaurants XXXX. progress by net we sales new to accelerate make we as along target unit and expansion of against our X% system-wide our to

sales term, moderating expect inflationary expect company-operated line margin and percent XXXX will full near our relatively pressured XXXX. growth the of we and will be in expectations With headwinds, year the margin percent ongoing company-operated remain with we in

to us The of Turning G&A. drive areas that for enables stakeholders. our to and for people our financial in will invest strength our long-term system efficiencies

We system-wide and to elevated investments, run the resource growth. in to expect over more XXXX we'll G&A drive business investments these which to long-term as to be digital Services, ultimately a technology, Global look time and reflects up about Through GBS. or sales percentage Business of X.X%, free more efficiently continue

tax to XX% primarily for interest top operating the balances line rate higher we projecting X% due year margin high performance. Despite growth increase to by headwinds XX%. driven and expense interest to expect margin our anticipate to throughout the effective P&L, this compared be mid- and average between year franchise an in to XXXX, XX% of We're XXXX between And rates. XX% debt we and and

XXX across strong be in this spend than will half restaurants more we unit $X.X plan billion we billion Globally, Transitioning and to expenditures, more segments, capital to open segments. continue openings about with between to our U.S. than dedicated returns. plan new X,XXX see and this openings U.S. IOM our year, which of of year IOM where we and these to to $X.X

second our more of Carlyle's China, in IDL about to acquisition in segment enable McDonald's year, from this to the expect completed China. and us We're minority fastest-growing including to market in believe benefit than the largest X,XXX restaurants XX% excited X,XXX to potential. and also our it further market's in where We ownership will our XX% recently we stake have open increased long-term

driven cash the anticipate additions restaurant we range. XX% we more conversion free about X,XXX strong expect with net generate by XXXX. flow in than X% growth Overall, finally, And XXXX to cash in unit in flow

capital Going remain forward, our priorities unchanged. allocation

the includes well business growth. as in capital This technology, investing drive both as investments in First, GBS. expenditures and increased digital to cash

dividends Second, time. and returning all over share remaining free cash through buybacks flow

we C strategy playbook, remains and the maximize M, believe D While Accelerating to continue we results. right to Arches macro our the drive growth and pillars that is our the environment challenging, strong

long-term evolve that for our ability confidence any have positions to our growth continue shareholders. to We and economic ahead to our of the succeed stay customer to environment, our strengths competitive us system in and delivering

it Now to back close. turn let Chris to me over

Christopher Kempczinski

has job nearly the the the years, for first beacon For XX story millions, serve. in for familiar the best been one of support of over McDonald's world XX,XXX growth, we a and communities a franchising opportunity

and U.S. contributed the last million X.X jobs in In fact, business billion alone. our year to U.S. the GDP $XXX generated

as us of to step continues the to That's of stood around our brand itself world Even the customers. test of has our change, one reinvent and McDonald's ahead the stay because power time. continues

continuing take long-term will pioneer by the keep Kroc the the forward, in only only with working, we're While going we operating it strategy best, said in accomplishment." to of "The is a our advance smart of we the and pride spirit can growing when Arches mindset. collectively is way Accelerating Ray and risks individually

reimagine McDonald's to employees that, our and whose share day. and dedication for life the stool achieve. Thank we'll since franchisees, launch bringing am Arches, Even future you the our legs could will that much With we together. questions. this worldwide to we that to at we've to look with forward all is convention more our coming confident central of the so with together each every is all how passion our to customers upcoming there that I I accomplished X our experience Accelerating April and of take suppliers

Operator

from Our Instructions] with first David is question Evercore. Palmer [Operator

David Palmer

there's just trends they're anywhere, separately, I'm stable then any you that the quickly. been year, the lot second to if from think strong quarter. Do trend. have really thinking And a boycotts of Very in impact year basically the Probably U.S. IOM a even this slight? two-parter for results multiyear the since multiyear

these -- if a So think stable. if best that in those I'm in reaccelerate there remaining some for wondering over very because, you and or just quarter January. there a that months in the obviously, play here there's and dealing your lesson we're noisy whatnot no is to reason through shame there's maybe trends here with weather fourth

So goal with being to 'XX make viewing I'm wondering multiyear that best that that how reaccelerate play you're the happen. perhaps can your trend in into

Christopher Kempczinski

Thanks it's David, Chris. questions. the for

Middle Middle question your in most East. the the that pronounced First, is obviously, on about seeing we're the place the impact East,

Indonesia. some Muslim far other We are IOM seeing it like And then impact, as in Malaysia, on impact countries the as depends country.

So a population. larger example, a country, France, like for Muslim has that in

in Muslim France. in like seeing some the depends It is impact. but in very And located like seeing countries impact we a if on a some Spain, where it's then there. no in other seeing restaurant are area, much and impact We Italy, we're are

Also, really Middle like as and Malaysia. remarks. in But pronounced impact East said, the I countries seeing that prepared as much it the most is our we country. said, very So on in Indonesia we're depends in the and Muslim

improvement human that like this. on. making not is, going a brands on expecting plans. not outlook any on, any long ours. weigh so does tragedy what's significant see It's I going to this And as war We're think Our in conflict, that, we're this is

reacceleration, XXXX Back kind also about to normalizing at sales about in we which X% range, your of and in other potentially where more we're comp that historically. is also as to Investor talked been we growth the Day, a question prepared X% expecting said we've remarks, to be

on had we so a whether call it, horizon, great a X-year performance XX-plus percent XX% or on at horizon, So it look on over horizon, horizon. X-year a X-year a X-year you certainly

going a things I to considered year into gone that XXXX all So we more what like feel COVID look that. are about have great you have prior that's and moving think the to on. a But would typical

Mike Cieplak

from JPMorgan. Our is question next Ivankoe with John

John Ivankoe

McDonald's cases, And positive that actually France and leading in others on been things a question a of other by for lot France a then for has implemented couple is by The performance quite market markets now, leading successfully. copied in France. that were successfully, quite in been a others of done decades some were obviously ways indicator has in of of

So to sound like metrics? some up can the to I leading menu results? a in differently bit near the dip delivery. I markets it did you are those could had in fourth value, term? that have there quarter you some France guess, maybe think catching markets other course, apply ensure France improve you in we you to did don't in in mean from some done of within I of East sentiment, be possibly negative And excluding self-help could yourself, behind and find maybe understand kind little core indicators Middle to more do what that happening wanted now those the of market, the

Christopher Kempczinski

Sure. for question. the Thanks

one our of best in us historically been pointing France markets. You're for has right out

We highest that satisfaction our in of customer have market. some

our with franchising France. happy in our are to market. areas X of in have performance flows now. cash We We're some that on we not were highest And improve focused France in to if right that I isolate

we're offsides was on But don't success that put great certainly, team did there. new get value that nice has The job that. want that. seeing program with just and a reaction there in early a place first in and value pivoting we a very we The see is done to

operations with and of engagement that's lot something have that in second, opportunities on continue France, having we we've franchisees. And a then to been our

and we're years. feel very to track [Audio back to the Gap] performance also about side, So that going France business become IOM, is as most market certainly continue we've many, certainly to France I or IOM, right on have the our in I good but pressured lessons many market that positive But that in now over get accustomed on in think there. that

Ian Borden

market, think, on a prepared experience, of we've build entirely tremendous we a mean, One team business almost I our bring, an just team amount about and the leadership confidence experience maybe, we in in they comments. place bit the John, on right X to is talked think in McDonald's got as the have catalyst. that that a I team in remarks, things. and lot I'll has And Chris' of drive I a new

feel with about, we're people think the do in good. Obviously, you we very, to clarity drive a you going going France, maybe of take momentum think we're in issues those back that And with I underlying change. is to you what be But address. need that to direction. going to of have our them. together feel a kind got market right like to right we're the to you you opportunities I of look then off exist. approaching get it's right aggressive very kind a Chris track, both I have after that as little to you know on of the have of to sight I kind And how franchisees with think aligned when moment that go spoke bit fronts, in we the the experience And

Mike Cieplak

Jeff from is question next Barclays. Bernstein Our with

Jeffrey Bernstein

we about think question as XXXX. Chris, Great.

the easing traffic? comps used specific First, share I I'm sense in the if X% think components wondering guidance, get of wanted to we pricing, thoughts that's mentioned seeing encouraging. X% is But could versus to that U.S. and not I'm on so such between any just I you you the which clarify, IOM to

or talk guidance wide basis margin range. And end to on XX% help can upper of more if then I'm so fairly range, the wondering margins just the points you at narrow guess, say, mid- wide, XXX broadly, lead be I let's what lower to versus would perhaps or just range? from operating high that

Ian Borden

Jeff, it's Ian.

So that. me let take

I pretty think talked on in about about as talking we opening last comps quarters. of I -- the you been as and it, remarks, consistently we've our couple over think the know,

more our in and As kind obviously, come inflation levels. to getting I'll with have down call broadly back pricing inflation levels line down, what of normal coming is

X% that X% think I'd to more to the IOM you about mean norm in the a I think kind give I had only there we that's slower U.S. to year. of both texture year. historical the we why and this talk getting I of comps range is start back of

of important think I are a for that. couple reasons there

Firstly, a start XXXX. to we had really strong

I ago, we're And then the as both North you'll talked year as well. a weather against abnormally that we and 'XX benefit so mild were remember we in that lapping a obviously and Europe, So working just against obviously, we're about that. beginning think dealing with of America in tailwind

probably think the I the And year, if I being the the half back stronger, I of slightly think than think half. front year slightly was to about stronger probably about

were will incredibly be strong that continue strong Just that could, of margin, are demonstration to you strong again, quarters factors we top half. XXXX working leverage I I had certainly think, as think an the first the over to of going we to versus what a go X get towards And about, I growth. we believe is, think slightly margin half which op pretty if and macro had of mean be -- front easing to of against. line impact drive the this time, the able continue in talk we're op some XXXX look, On us back back we we've I to year XXXX,

in year If kind you XX-ish XX%. ended at XXXX, back to We over just we go last percent were of that range.

forward of basis. margins proof that's pretty I a think our strong percentage grow ability a to to on as we continue point look

headwinds got as really I ability to Chris to feel about over but work we've time. through, margins continue to some confident talked think obviously, grow our about XXXX,

Mike Cieplak

next Tarantino is from with Baird. Our question David

David Tarantino

you on the Middle you on sales fourth you're help that in how your much to your in quantify guess could questions. the My One, I seeing impacted X impacts quarter? could estimate franchisees whether that East. question the is on you secondly, then your will be areas and impacted And you comment the have assistance been move through most needed some XXXX? as of health temporary think the and

Christopher Kempczinski

Chris. it's David,

East. we franchisees you've some in done, have then year. health have very in can But said as Just this in world, that you going with support at the the the them really as Ian we're into us of the fortunate IDL our note Middle we is well-capitalized through specific -- results, sometimes we as of very meaningful, I'll to get then see do not historically the employee be I franchisees, a Middle and terms say, of to But that suffice can also And challenges miss. let we're couple our I whatever partnership deferrals. But beginning impact in as in the infer in work to clean strong, East. around franchisees seen difficult numbers you things do on of during things that up periods

other it forms be can support. Sometimes of

ongoing franchisees. are we'll those so conversations with have And that our

our in together things with working and times franchisees the that good is we've believe bad been through time. successful We and over way that doing partnership

be much Middle to have situation for anything the but And you significant. impact we it the you East, Ian, in So right approach is to to I'll by it's now pass add. going situation want certainly, a else that very off

Ian Borden

Chris. Thanks, Yes.

as going these of about in and of with size that of strength scale strength you facing back in and one I means So if a we've any business model. we're position our years, just to East Middle of mean, through an the through of several geographic financial incredibly a before, challenges, I and war couple including work we're to breadth, the number Obviously, our look maybe of to the that. challenges, you that, different talked I've on. think the currently had kind business that's last builds a we've over David, got work know think external the I resilient the

kind obviously support our It's model. together is franchisees to business before, mean how for or when we I talked as of our we do of partners, targeted temporary need. franchisees as part when obviously, support outside or with to of work are providing But warrant go regards designed, DL In operators I've that, you owner control in it's and conditions to know, always, their most and support. partners who about

closely the Chris challenges more. or to as over us incredibly to together. some do do I'm worked very Middle partners think working members continue on years. very, this we've partners our years with We've majority through partners the confident team with we'll for the have And working supporting in that. got business the been that I DL And XX think communities in strong East, those I of the the through get of with and region, that in said, be we'll focused we a variety

Mike Cieplak

next from is Our Eric question Gonzalez with KeyBanc.

Eric Gonzalez

know growth I'm wondering in a that your you big of I maybe profit have comment do specifically. if China could on some country. huge part aspirations it's today, not but you

you're some could they're results seeing how challenges gain the on macro to share comment market. the in how that country? and brand of positioned you if in talk impacting that maybe So And about is that

Christopher Kempczinski

there. a were XXXX Sure. We Well, how in happy growth overall, China. We're good our very China. seeing business performed in we with had strong

We in also restaurants China. built X,XXX

much do XXXX very our we expect from we're that from similar and So standpoint. would development aspirations on track to in something

bit is is, is in necessarily that more under that, to environment And headline now. you've get in and but And promotional. in country it feel about read QX, we seen in consumer promotional. overall what didn't sure China, the follow getting more our in little as We saw a environment focus is on we certainly, companies, So other the seeing China remain is Certainly, and the making that -- right sentiment pressure good progress leading in competitive. number particular, the a growth. about we're with of more

many think competitiveness certainly to Investor grow don't But trends comp there's be we're to have that So talked that as the places in GDP if at and to performance that going I in see we continue in market think do opportunity continue Day, out about to for about where continue this us really what to presence. We we to penetration do in to good we're that digits. build think and development going going market. wealth our maintain we overall consumer China, you an McDonald's macro need mid-single to to market to

overall which be us Ian increased is why as on So continues we mentioned. outlook for our to China very robust, stake,

Ian Borden

the in was and at we to the opportunity remain And restaurants as as milestone restaurants as Chris high about I the increased look I our think I continue completed XXXX, China, market stake additional XXXX, would things just I And really a we looking for important is, stake take a by to might in to ability there to January. end acknowledge our XX% to we long-term an opportunity opened the couple team our the add with really acquisition, team long-term that Chris. which XX,XXX end remarks, in forward of and stake that optimistic an we X,XXX just of think, additional all-time to of us. and in on just we're getting to of about over which forward. first, acquisition I talked XX% mentioned, our that have mean we

Mike Cieplak

Morgan next Stanley. Harbour Our Brian question is from with

Brian Harbour

or of breakfast the Yes. recently? by color quarter late we've some the Maybe I pricing the you if Are kind into can you fourth about talking in ask U.S. I'll daypart, on willing other about comments was more any night first also just quarter? to companies think heard you And say provide have where any and also perhaps

Christopher Kempczinski

last have work any to offset as of looking we describe inflation. in give bit single-digit were again, increases as I pricing. we've pick continued the But price mid- the a would comments, Ian saw in you on single-digit were macro high Sure. We to pricing details. high but just little depends where through kind Well, country, I'll mid- It some what year. certainly, to to U.S.

calls, about seeing, down seeing there's are on We size low-income I've reduction transaction the talked We're trade that some particularly some among also as prior we're that consumer, there. seeing.

less, inflation But be of low took. going to and a the is XXXX, 'XX, the single-digit on I pricing. So inflation in probably you that bit think we be as absolute consistent we with that little the pricing up that pricing, certainly, in think will about end offset where

competitive a activity there. pretty area, standpoint, on balanced daypart lot in going But a say of a I'd to From continues be breakfast breakfast.

business, our That's around that and particularly lunch. to daypart daypart you dominated is continues well. do as single know, biggest Our

on noteworthy particularly Ian, day any but I have that say nothing So insights would there. shed maybe other parts, to you

Ian Borden

Yes.

year, obviously, about pretty through to consistent it for just continuing we're to sure possible. single-digit and when pricing, of that in did the we see noted, with But goes range. came and doing I covered important inflation the mean, was in with of XX%. think which think the in are and that way I've high we just mean, pricing, see overall line just what as we've I I in all that back a effective capabilities pricing fourth fills, You, I pricing spoken mean, maybe taking think couple the around flow is that most to Chris, down, in I quarter, tools Chris place that make before really level we're because I put the bases, but

into peak. knowing head a has inflation Obviously, as down bit its from fair we come XXXX,

the be I forward. pricing, competitive. knowing weary and as down we to roughly we as as environment together obviously, led be We kind that I decisions own restaurants are pricing said forward in to in we're those make look more weary with consumer decisions the earlier, continue we as our and XXXX look our our think I thoughtful certainly work with in of we franchisees, or their to know who through will think We'll come year. of line certainly going continue expect will pricing, that to consumers be

Mike Cieplak

with Our next is Geiger UBS. from Dennis question

Dennis Geiger

lower Great. Chris, just of bit. U.S. wanted that income managing check some the the you color I some of a to think, on just gave consumer up follow I little consumer, the on and

think or And does that about what U.S. you talk evolving been you and are options incidents about pick there could that the the up quarters? you seen in with if ultimately, and seeing Or of the that year. check largely in anything mean consistent intensity management the as of consumer this is curious U.S. kind you've in you promotions value there, elaborate any on the Just more some? what recent

Christopher Kempczinski

Sure.

about talked what pressure we low-income see the I with think consumer is you on U.S. call, consumer. the the prior where consistent with that

That Particularly, actually much we standpoint, that's on become more decrease There's less most industry been think an consumer been pricing and From XX,XXX under. is has recent recently quarter. affordable. packaged home So food. that pressured. eating cohort saw in at more I the call taken it as

is I that IEO that seeing that more you're on affordable low-income from eating is So becoming a at standpoint putting think consumer. home some pressure

real not in seeing behavior If you think income, those. income, any middle about we're high with change

into continue with head as low-income think groups. what to certainly more is that I And attention the affordability. with to battleground as We probably what share you're XXXX describe is consumer. you to see I gain But would going those

probably Those are that. that points. 'XX, that as lower in about message, the point absolute X is in lower to going get value for the like probably front them price that's a something a a think the half which price maybe consumer in So with think or consumer being that resonate $X price than for being absolute point more important into absolute we to little less may a particularly, bit something be restaurants

So -- that's up we go that. to after are set to able be well

level probably local for consumer. think there know, to DXXX as you're the the platform, to value provide sure at U.S. in make and some have our that activity see to good low-income going I we you We continue

Mike Cieplak

with question Senatore next of Sara is Bank America. from Our

Sara Senatore

than to, given wanted might ask lower G&A in have fourth is the the and quarter, expected implications sales X.X% it the that system-wide actually true just were you suspect in about Middle of I to the fact East. you system-wide which the sales guided that below I came the despite in

to but seeing sales, whether -- you what was curious of flex And time to along guide trying so there? are just any any I'm the more you of your perhaps because Arches? to spend? able you usually understand flex percentage are the I have accelerating to And -- dollar G&A? forecast system-wide extent of internally of improvements in extent I lines the what curious know sort actually you you of to

Ian Borden

Sara, it's Ian.

we we've our talked we want to mean, Let broad remarks this about as I G&A that area. going where way heard invest some lot opportunities drive A going business greater our why think in is we finance, can. the tech, in about me kind like we're work area run led know as me HR, transformation firstly, these after the to efficiency. stood we to continue continue to spend that look, in and of It's areas take But Global in to think you've I areas upfront like by getting We Services is to to that organization X talk opportunities about and that up of we strategic driving work opportunities the got Business have efficiently before. that sourcing. in efforts one. indirect I is we be in Well, think buckets.

accelerating of the how back so get can we what how get that designed of the initiative drive those was, more running we if do we efficiency go was strategic we're we're do really of to what on and whole we we greater around part operate, efficient how make get organization, principles continue in you continuing which to is focused kind was which more how faster, in that do So innovative business. the to investments how

running we've second got The of exist, like G&A efficiently And of we've sure part significant kind make in spend believe to the that resources that we invest feel obviously opportunities. the believe behind opportunities strong broad more we to for investing the is is business and to of to drive the continue got have available area areas we business. opportunity we growth and returns the

strong and are continuing examples our type to of opportunity and we've we capabilities going think make and invest that when digital growth strong areas examples those have. us, continue platforms are where to obviously look we growth to from of drive behind of Those, mix you those of for I investment. to investments obviously kind growth at that we're really the continue to returns tech previously think, significant the talked the I coming

think you percentage believe forward. of highlighted. I do those I in sales. be to G&A short of the our And going think in -- a so to gain kind areas I term, be to look focus able as in that's is as over leverage that continue certainly I time, But we'll

Mike Cieplak

Our next Carril question is RBC. with from Chris

Christopher Carril

XXXX. mentioned them line in be to believe Just margins. McOpCo on this you I expect relatively you year versus

maybe for maybe upside? you company of inflation the U.S. if So opportunity and finally, on can some your around maybe on margin expand cost see this puts detail you outlook, IOM, where and takes any outlook? And versus

Ian Borden

me Yes, let that. you're take Well, Chris. right.

going our you we XXXX. mean as about percent for talked the think in are think few will that on. I ended be roughly company-operated XX we in said, I we comments, fact with opening think that a there margin I line are our where things

it, in I think talk kind that for the international. at low U.S. of U.S., in the inflation mean be kind then I'll So look single-digit you about I and we will range. commodity if think 'XX, of

Part be California, aware is wage to single-digit think higher range. in of that because effect April. of mid- I to impact inflation that increases of which beginning to know into I wage at probably we're significant come and the of of the you'll there the have through work the what going in

mid-single-digit commodity wage I we that in to think think single-digit the low inflation in to low probably I on again, the commodity expect internationally, range, side, inflation be range.

work XXXX. we carryover got, kind through we've as of effects. still obviously, at higher much time, levels that So experienced through got the And current of inflationary we kind the same we've obviously, from inflation

So from bit maybe Obviously, pressures. think kind the about of we of those are you've kind perspective. sales of what a talk a heard us --

said. to some lift So sales drive we to a a settle inflationary we've strategies and look can plans obviously sales, in obviously, really, get which But our ability able as the continue of continue confident I remain think that we I really kind grow as got to pressures continue consistent landing we're place. on And in of forward through we're really leverage do confident where in XXXX were with that going to these grow margins to as we we basis. begin that more to to

Mike Cieplak

time with Bank. from one more Lauren have Silberman question for We Deutsche

Lauren Silberman

Just a follow-up.

in talk related positive driving ticket do then? 'XX Can to a in actual higher question app my any Given on expect changes the of look specifically the as then ahead about in U.S., you the is offers into 'XX on frequency. Have promotions digital the lot modest your side. as to U.S.? value pricing And you the traffic you of approach

thoughts -- there. just to extent what is to margin any digital franchisees? And So accretive just

Christopher Kempczinski

Sure. traffic don't as we give guidance. you know, Well,

think a to this always get specific success. is So to to traffic and expect the do that and you we into growth. price fair what growth need have in about success to see formula long-term traffic. both balance we I But say industry the in need won't you have of That's having kind it's for

use we kind as Star. of that's our what North So

up set well balance. really we're to of that think kind I have

the around I great at As is look world, our business in brand our shape.

as world performance satisfaction We almost our and it. of world. around country you We're the single are excellence we better or around highest seeing operations our customer customer get the some execute in pace, every know our as program scores seeing

think service improve we very I saw year despite and roughly got cash seconds. in times last franchisee we've the were we're big our most by of with globally, franchisees. QX, flows flows seeing price good XX up the of In healthy U.S., our all cash And franchising alignment $XX,XXX headwinds. markets,

we're think long-term our set that focus. So right part have balance business as to as well I a of up

Mike Cieplak

Ian, Chris. day. Have and you, great Thank Okay. thanks, everyone, Thanks, for a joining.

Operator

Investor Corporation This Call. McDonald's concludes

a may great You day. now and disconnect, have

McDonald's (MCD) 5 Feb 242023 Q4 Earnings call transcript