Today, McDonald's (MCD, Financial) saw a slight decline in its stock following the release of its first-quarter results. The company's adjusted earnings per share (EPS) fell short of expectations, ending a streak of eight consecutive beats, with the last six surpassing expectations by double digits. This came as a surprise to many. Although revenue met forecasts, comparable sales (comps) were not as robust as in previous quarters, accompanied by cautious remarks during the earnings call. Despite these factors, the stock's resilience is notable, likely due to a recent pullback.
Key highlights from the report include:
- Global comp sales rose by 1.9%, a decrease from 3.4% in Q4, with U.S. comps at 2.5%, down from 4.3% in Q4. This was partly due to strategic menu price increases, successful marketing, and growth in digital and delivery services, despite facing challenging comparisons from Q1 of 2023.
- International Operated Markets (IOM) saw a 2.7% increase in comps, led by the UK and Germany, while International Developmental Licensed (IDL) comps slightly declined by 0.2%, affected by the ongoing conflict in the Middle East.
- McDonald's acknowledged ongoing global consumer pressures, particularly among lower-income demographics, impacting the quick-service restaurant (QSR) industry's traffic.
- Without providing specific comp guidance, McDonald's anticipates sales moderation in 2024, facing more significant macroeconomic challenges than initially expected.
- On a positive note, McDonald's is planning to expedite new restaurant openings, aiming for 50,000 locations by the end of 2027, with significant development progress in markets like China.
The first quarter of 2024 has been somewhat disappointing for McDonald's, marking a potential end to the substantial comp growth seen in the previous year. The company is navigating through tough macroeconomic conditions and anticipates challenging comparisons in the coming quarters. However, the minimal stock reaction suggests that investors might have already anticipated these challenges.
