McDonald's making 'bold and aggressive investments'

by Monica Watrous
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McDonald's and its franchisees are investing $6 billion over the next two years to transform its U.S. restaurants.
 
 

OAK BROOK, ILL. — McDonald's Corp. served more customers more often last year, a sign the company successfully has completed its "transition from turnaround to growth," said Stephen J. Easterbrook, president and chief executive officer.

Going forward, the company is making "bold and aggressive investments in our most promising growth platforms" to maintain its momentum in the year ahead, Mr. Easterbrook said.

Steve Easterbrook, McDonald's
Stephen J. Easterbrook, president and c.e.o.

"This was our first full year of positive comparable guest count growth since 2012," Mr. Easterbrook said during a Jan. 30 earnings call with financial analysts. "We are pleased with our progress but certainly not satisfied. There is more potential in the marketplace and in our plan, and we are leveraging our considerable size and scale to unlock it. We are sharper and more focused in the way we organize, think and act, and we are confident in our ability to execute with excellence to drive sustainable, long-term growth."

Net income in the fiscal year ended Dec. 31, 2017, was $5,192.3 million, equal to $6.37 per share on the common stock, up 11% from $4,686.5 million, or $5.44 per share, in the prior year. Revenues totaled $22,820.4 million, down 7% from $24,621.9 million. Revenues decreased due to the impact of the company's refranchising initiative.

Net income for the fourth quarter was $698.7 million, equal to 87c per share, down 41% from $1,193.4 million, or $1.44, in the year-ago period. Results included a one-time net tax cost of approximately $700 million related to the U.S. tax reform. Revenues totaled $5,340.2 million, down 11% from $6,028.9 million.

Global comparable sales increased 5.3% for the full year and 5.5% for the fourth quarter, driven by growth across all segments.

About 3,000 U.S. restaurants feature a modern design and technology, with more revamping underway.
 

McDonald's continues to revamp its U.S. restaurants, finishing the year with about 3,000 locations featuring a modern design and technology, Mr. Easterbrook said. The company is on track to convert more than half of its U.S. restaurants to the new "expression of the forward-looking brand of McDonald's" by the end of 2018, Mr. Easterbrook said.

Over the next two years, McDonald's and its franchisees will invest approximately $6 billion to transform the U.S. business, Mr. Easterbrook said.

"The impact will extend beyond the new equipment and decor we're bringing to the restaurants," he said. "This is an investment on our local communities as the benefit of these projects will extend to construction crews and suppliers. We also will continue demonstrating our commitment to our people as we look at enhancing the training and development opportunities now offered through our Archway to Opportunity program."

Delivery also has become a meaningful contributor to comparable sales in several of McDonald's largest markets. The company now offers delivery from more than 10,000 restaurants globally.

"Delivery orders tend to surpass average check size by 1.5x to 2x," Mr. Easterbrook said. "And with high customer satisfaction, we are seeing solid repeat business from those who try it."

In the coming months, McDonald's plans to initiate marketing campaigns to raise awareness of its delivery and mobile order-and-pay options in the United States.

"And as we do, we're optimistic this will contribute to the momentum of our business," Mr. Easterbrook said. 
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