McDonald’s Corporation today announced results for the fourth quarter and year ended December 31, 2020.
“2020 will be remembered as one of McDonald’s most challenging, yet inspiring, moments in our long history. The resilience of the McDonald’s System was on display – making safety and service a priority, putting our customers and people first, and running great restaurants,” said McDonald’s President and Chief Executive Officer Chris Kempczinski. “Against an uncertain backdrop, we are committed to staying true to our values and our brand purpose to feed and foster communities. By investing for the future and leveraging competitive strengths within our Accelerating the Arches strategy in drive-thru, delivery, and our growing digital presence, we’re confident we can continue to capture market share and drive long-term sustainable growth for all stakeholders.”
Fourth quarter financial performance:
- Global comparable sales declined 1.3% while improving from the prior quarter, reflecting positive comparable sales in the U.S. of 5.5%, and negative comparable sales in the International Operated segment and International Developmental Licensed segment of 7.4% and 3.6%, respectively.
- Consolidated revenues decreased 2% (3% in constant currencies).
- Systemwide sales increased 1% (flat in constant currencies).
- Consolidated operating income decreased 7% (9% in constant currencies) and included $142 million of strategic gains primarily related to the sale of McDonald’s Japan stock. Excluding these gains, operating income decreased 13% (15% in constant currencies).
- Diluted earnings per share of $1.84 decreased 12% (13% in constant currencies). Excluding $0.14 per share of current year strategic gains primarily related to the sale of McDonald’s Japan stock, diluted earnings per share was $1.70 for the quarter, a decrease of 14% (15% in constant currencies) when also excluding $0.11 per share of prior year income tax benefit due to regulations issued in the fourth quarter of 2019.
Full year financial performance:
- Global comparable sales declined 7.7%, reflecting positive comparable sales in the U.S. of 0.4%, and negative comparable sales in the International Operated segment and International Developmental Licensed segment of 15.0% and 10.5%, respectively.
- Consolidated revenues decreased 10% (10% in constant currencies).
- Systemwide sales decreased 7% (7% in constant currencies).
- Consolidated operating income decreased 19% (20% in constant currencies) and included $268 million of net strategic gains. Excluding these items, operating income decreased 23% (23% in constant currencies), when also excluding $74 million of net strategic charges from the prior year.*
- Diluted earnings per share of $6.31 decreased 20% (20% in constant currencies).*
- Comparable Sales: Quarterly global comparable sales results improved sequentially since the second quarter of 2020. Comparable guest counts remained negative across all segments for the quarter.
- U.S.: Comparable sales results benefited from strong average check growth with positive comparable sales across all major dayparts. The Company’s strategic marketing investments and promotional activity, including those featuring core menu items, had a positive impact on comparable sales.
- International Operated Markets: Comparable sales remained negative in most markets as restaurant operating channels and hours were significantly impacted by COVID-19 resurgences and the related government restrictions that have carried into 2021 in most countries. The comparable sales decline in the quarter was primarily driven by France, Germany, Italy and Spain. While comparable sales remained negative in most markets, comparable sales were positive for Australia and the U.K. throughout the quarter.
- International Developmental Licensed Markets: Comparable sales results were impacted by negative comparable sales primarily in Asia and Latin America, partly offset by strong comparable sales in Japan.
Results for the quarter and year reflected sales declines in the International Operated Markets and International Developmental Licensed Markets segments as a result of COVID-19 resurgences and government restrictions. For the quarter, these results were partly offset by stronger operating performance in the U.S. due to higher sales-driven restaurant margins.
Results also included the following:
- Higher Selling, General and Administrative Expenses for the quarter and year reflecting:
- $80 million and $100 million, respectively, for the Company’s five year commitment to Ronald McDonald House Charities;
- one-time investments in renewed brand communications as part of the “Serving Here” campaign launch that was announced with the new growth strategy, Accelerating the Arches; and
- lower incentive-based compensation expense.
- Over $200 million of incremental franchisee support for the year for marketing to accelerate recovery and drive growth across the U.S. and International Operated Markets, a majority of which was recorded in Selling, General and Administrative Expenses.
- About $100 million was recorded in the U.S. and the remaining support was recorded in the International Operated Markets segment.
- Higher restaurant closing costs for the quarter and year of $30 million and $68 million, respectively, in both the International Operated Markets and in the U.S. The U.S. costs were primarily related to planned closings of McDonald’s in Walmart locations.
- Lower gains on sales of restaurant businesses for the quarter and year.
- An increase of reserves for bad debts of $58 million for the year, related to rent and royalty deferrals.
RESTAURANT UPDATE
The Company has continued to follow the guidance of expert health authorities to ensure the appropriate precautionary steps are taken to protect the health and safety of our people and our customers.
As a result of COVID-19 resurgences, throughout the quarter, there have been numerous instances of additional government restrictions on restaurant operating hours, limited dine-in capacity in most countries and, in some cases, mandated dining room closures particularly in the International Operated Markets. These restrictions, which have carried into 2021, are impacting most of the Company’s key markets outside of the U.S., particularly those with fewer drive-thru restaurant locations. The Company expects some restrictions in various markets so long as the COVID-19 pandemic continues.
