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McDonald’s Corporation Reports on Q4 and FY 2023

02/06/2024

In a release dated February 5th 2024 McDonald’s Corporation, a bellwether for the QSR segment of the restaurant industry, reported results for the fourth quarter and FY 2023 ended December 31st 2023. For the period, the Company earned $2,039 million on total revenue of $6,046 million with a diluted EPS of $2.80.  Comparable figures for the fourth quarter of fiscal 2022 were net income of $1,903 million on total revenue of $5,927 million with a diluted EPS of $2.59. Revenue for Q4 increased by 12.1 percent and operating margin advanced from 43.6 percent for Q4 of 2022 to 43.7 percent for the most recent quarter. Gross margin for Company-operated stores rose from 15.2 percent in the fourth quarter of 2022 to 16.9 percent for the most recent quarter attributed to lower costs for food ingredients and packaging, rationalization of menus, the Accelerating the Arches efficiency initiative, increased traffic and promotions. The Company may be benefitting from trade-down from restaurant dining in the demographic with an annual income of $100,000.

 

For FY 2023 the Company posted net earnings of $8,469 million on revenue of $25,494 with a diluted EPS of $11.56. Comparable values for FY 2022 were net earnings of $6,177 million on revenue of $23,183 with a diluted EPS of $8.33. Results for FY 2023 include charges of $290 million for the Accelerating the Arches program and $72 for obsolete software.

 

In commenting on results, Chris Kempczinski, president and CEO stated, “Our global comparable sales growth of 9 percent for the year is a testament to the tremendous dedication of the entire McDonald’s System," said McDonald's President and CEO Chris Kempczinski. "Strong execution of our Accelerating the Arches strategy has driven over 30 percent comparable sales growth since 2019 as our talented crew members, and the industry’s best franchisees and suppliers have demonstrated proven agility with a relentless focus on the customer. By evolving the way we work across the System, we remain confident in the resilience of our business amid macro challenges that will persist in 2024."

 

For the fourth quarter of FY 2023, McDonald’s posted comparable store sales growth in the U.S. of 4.3 percent with comparable store sales growth for the international operated markets segment of 4.4 percent and with global comparable store sales growth of 3.4 percent. Over FY 2023 global comparable store sales increased by 9.0 percent.

 

On November 20th 2023 the Company announced purchase of the minority equity held by the Carlyle Group in CITIC, the McDonald’s entity operating in China. McDonald’s Corporation will now hold a minority 48 percent share in CITIC.

 

Projections for 2023 in the SEC 8K report included net restaurant expansion contributing 2.0 percent to system wide sales with an operating margin of 45 percent. On December 31st 2023  there were 41,822 McDonald’s locations with 2,142 Company-owned restaurants. 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 had a market capitalization of $215,460 million on February 5th 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 $245.73 to $302.39 with a 50-day moving average of $291.05. MCD trades with a forward P/E ratio of 23.8. The 12-month trailing operating margin was 47.6 percent and profit margin, 33.3 percent. Return on assets was 14.3 percent. Prior to release MCD closed on Friday February 2nd at $297.10 but opened lower, post-release on Monday February 5th at $288.40.