McDonald's(MCD) - 2024 Q4 - Annual Results

Sales Performance - Global Systemwide sales exceeded $130 billion for the full year 2024, with growth of over $1 billion (more than $2 billion in constant currencies) [12] - Systemwide sales to loyalty members reached approximately $30 billion for the full year, with a 30% growth over the prior year [12] - 90-day active loyalty users were over 175 million across 60 loyalty markets, reflecting a growth of approximately 15% over the prior year [12] - Global comparable sales increased by 0.4% for the fourth quarter, with the U.S. segment decreasing by 1.4% [13] - Systemwide sales for the year ended December 31, 2024, increased by 1% to $120,933 million from $119,750 million in 2023 [71] - Franchised sales for the year ended December 31, 2024, increased by 2% to $30,603 million compared to $29,945 million in 2023 [71] Financial Results - Consolidated revenues for the fourth quarter were flat at $6.388 billion, while full year revenues increased by 2% to $25.920 billion [17] - Total revenues for the year ended December 31, 2024, were $25,920 million, an increase of 2% from $25,494 million in 2023 [36] - Net income for 2024 was $8,223 million, a decrease of 3% compared to $8,469 million in 2023 [36] - Diluted earnings per share for the fourth quarter remained flat at $2.80, with a full year diluted earnings per share of $11.39, a decrease of 1% [17] - For Q4 2024, net income decreased 1% to $2,017 million, with diluted earnings per share flat at $2.80, impacted by foreign currency translation which reduced EPS by $0.02 [56] - For the full year 2024, net income decreased 3% to $8,223 million, and diluted earnings per share decreased 1% to $11.39, with a negative impact of $0.06 from foreign currency translation [57] Costs and Expenses - Selling, general and administrative expenses increased by 1% to $2,858 million for the year ended December 31, 2024, compared to $2,817 million in 2023 [77] - The company experienced ongoing inflationary cost pressures impacting margins in both the U.S. and international operated markets [75] - Interest expense increased by 6% for the quarter and 11% for the year, driven by higher average interest rates and debt balances [86] - The Company incurred strategic charges related to restaurant closures and restructuring, including pre-tax charges of $74 million for Q4 2024 [58] Strategic Initiatives - The "Accelerating the Arches" growth strategy continues to be a focus for the company, aiming to enhance market share through value and innovation [11] - The company is focusing on its "Accelerating the Organization" strategy, which includes restructuring charges expected to continue until 2027 [48] - The company plans to continue investments in digital and technology transformation efforts to drive future growth [78] - The company is investing in technology and digital engagement to transform customer experience, including mobile ordering and payment systems [109] Market and Operational Challenges - The war in the Middle East has negatively impacted Systemwide sales and revenue, particularly in the International Developmental Licensed Markets & Corporate segment [51] - The competitive landscape remains intense, with competition from traditional and non-traditional players impacting market share and sales [110] - The company faces challenges in staffing, which can affect service speed and customer satisfaction, particularly in a competitive labor market [123] - Supply chain interruptions could lead to increased costs and affect the quality and availability of products, impacting overall operations [118] Future Outlook - The company expects capital expenditures for 2025 to be between $3.0 billion and $3.2 billion, primarily for new restaurant unit expansion [96] - The company anticipates a net restaurant unit expansion contributing slightly over 2% to 2025 Systemwide sales growth in constant currencies [96] - The company plans to open approximately 2,200 restaurants globally in 2025, with about 600 in the U.S. and International Operated Markets [96] Financial Health - Free cash flow is defined as cash provided by operations less capital expenditures, indicating the company's ability to convert net profits into cash resources [25] - Cash provided by operations totaled $9.4 billion in 2024, slightly down from 2023, with free cash flow at $6.7 billion, a decrease of $580 million or 8% [90] - The company’s cash and equivalents balance decreased to $1.1 billion at year-end 2024 from $4.6 billion in 2023 [93] Regulatory and Environmental Considerations - The company faces increasing regulatory and legal complexities that could materially affect operations and financial results, including compliance with food safety and marketing regulations [133] - The company is subject to scrutiny regarding environmental and social impact matters, which could affect consumer perceptions and business operations [149] - The company is working on initiatives related to climate action and sustainability, facing increased pressure for transparency and accountability in these areas [150] Risks and Uncertainties - Changes in tax laws and unanticipated tax liabilities could adversely impact profitability and financial results [138] - Fluctuations in commodity prices and labor costs could negatively affect the profitability of company-owned restaurants [146] - A decrease in credit ratings or increased funding costs could adversely affect profitability and operational flexibility [147] - Security incidents involving unauthorized access or breaches could lead to reputational damage and financial losses, including mitigation costs and reduced sales [131]