McDonald’s 4Q Earnings Call Nuggets: Europe and Growth Drivers

McDonald’s (NYSE:MCD) reported its fourth quarter earnings report and discussed the following topics in its earnings conference call. Take a look.


David Tarantino – Robert W. Baird asked: I have a question on Europe. You mentioned all the issues, austerity measures and low consumer confidence in December, yet your comps ended the year on a high note.

I was wondering if you could comment on the underlying tone of business and whether you are starting to see any signs that the consumer is starting to pull back as you parse through your data either in your internal data from McDonalds or as you look at the market conditions?

Jim Skinner – Vice Chairman and CEO responded: I’ll just give you an overview from my vantage point. You’ve already talked about all the bad news in Europe and certainly there are number of issues there that we have to deal with in terms of headwinds, but I think regarding the McDonald’s brand despite negative market momentum, it continues to show increases in both in formal eating out and the QSR share.

We continue to take share in those market places and sales have been solid. Our value convenience and overall business model continues to serve us well there. We are positioned well with branded affordability, strategic menu price increases in premium products across the board in Europe.

As I have said many times, I think that our business model serves us well in any environment as long as we propel ourselves through that time period with a proper level of levers in our business.

The most important thing right now around the world and has been really if you look at it for the last eight or nine years is everyday affordability on the menu, coupled with the premium sandwiches and fourth-tier menu items in that marketplace that continue to serve us well. Along with the reimaging, we’ve not stood still, so if you look at the contemporary nature of our brand in that market during what one could term a very, very difficult economic downturn, which we’ve had before in Europe.

This is not the first time we have gone through this. McDonald’s continues to push forward on behalf of the consumers in those marketplaces and it continues to serve us well. Now relative to parsing the data, which is something that Pete would do, maybe he has some other information that might differ from my opinion.

Peter Bensen – EVP and CFO added: David, I think Jim gave a good overview. In terms of looking at things like menu mix or product change, we’re really seeing no change in customers’ behavior. The premium food events and fourth-tier items continue to sell extremely well and that happened throughout the fourth quarter.

Drivers of Comp Growth

Diane Geissle – CLSA asked: Could you breakdown the drivers of the comp growth whether it was – I think you talked about traffic being up–but was there pricing in there as well?

Peter Bensen – EVP and CFO responded: Yes, Diane. Specifically in the U.S. for the year we had about a 3 percent price increase spread throughout three different price increases that we took.

Europe, if you exclude Russia, which had pretty high inflation, we averaged about a 2 percent increase throughout the year and in APMEA across the various markets, again various amounts to various timings we averaged about a 4 percent increase.

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