McDonald's(MCD) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Global comparable sales increased by 5.9% for the quarter, marking the 17th consecutive quarter of growth [6][13] - System-wide sales grew by 7% in constant currencies, translating to over $1.5 billion of growth across the system [26] - Earnings per share (EPS) for the quarter was $2.11, with operating margins at 44% [27][28] Business Line Data and Key Metrics Changes - In the U.S., comparable sales rose by 4.8%, driven by a healthy average check increase despite negative traffic [13][14] - International operated markets saw a 5.6% increase in comparable sales, with all markets contributing positively [14] - The international developmental license markets reported an 8.1% increase in comparable sales, with Japan, China, and Brazil being significant contributors [16] Market Data and Key Metrics Changes - The UK achieved its 54th consecutive quarter of comparable sales growth, while France and Germany marked their 10th consecutive quarters of growth [15] - In Taiwan, the developmental license model has shown positive results, benefiting from local leadership and insights [9] - Japan has experienced four years of comparable sales growth, adapting menu items to local tastes and promoting digital capabilities [9] Company Strategy and Development Direction - The company is focused on a "velocity growth plan" aimed at enhancing customer experience and operational efficiency [6][18] - Investments in technology, such as Dynamic Yield and Apprente, are intended to improve customer engagement and operational efficiency [20][21] - The company aims to balance competitive pricing with maintaining profitability, particularly in the breakfast segment [36][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's long-term growth strategy despite facing competitive pressures and economic challenges [33] - The company is committed to investing in technology and R&D to drive future growth, with expectations for G&A to increase in 2020 due to these investments [39][56] - Management acknowledged the importance of improving drive-thru service times and customer satisfaction as key drivers for future traffic growth [61][64] Other Important Information - The company approved an 8% dividend increase, marking the 43rd consecutive year of dividend growth [29] - Foreign currency translation negatively impacted earnings by $0.03 per share, with expectations for continued headwinds in Q4 [29] Q&A Session Summary Question: Impact of a competitor entering the breakfast market - Management acknowledged the competitive nature of the breakfast segment and expressed confidence in their ability to protect and grow market share despite increased competition [36] Question: G&A growth and technology investments - Management indicated that G&A is expected to rise in 2020 due to technology investments, but emphasized the importance of these investments for long-term growth [39][40] Question: Plant-based burger testing in Canada - Management is interested in the plant-based product's potential and is focused on understanding consumer demand and operational execution [42][43] Question: Technology spending and ROI - Management highlighted the disciplined approach to G&A and technology spending, asserting that investments are aimed at driving growth and improving operational efficiency [47][48] Question: Earnings outlook for 2020 - Management remains confident in their long-term growth algorithm, despite challenges in 2019 affecting earnings per share [52][56] Question: U.S. traffic trends and competitive pressures - Management noted that traffic trends remained negative but did not show significant changes compared to previous quarters, attributing some fluctuations to competitive pressures [57][58]