Summary
McDonald's Corporation's first quarter 2018 results, filed May 7, 2018, show a revenue decrease of 9% (15% in constant currencies) to $5.14 billion. This decline is primarily attributed to the ongoing strategic refranchising initiative, which shifts revenue from Company-operated sales to franchised revenues. Despite the revenue dip, Net Income rose 13% year-over-year to $1.38 billion, translating to a 17% increase in diluted Earnings Per Share (EPS) to $1.72. The company also reported strong global comparable sales growth of 5.5%, indicating underlying operational strength. Key drivers included positive comparable sales in the U.S. (2.9%), International Lead Markets (7.8%), and High Growth Markets (4.7%), demonstrating resilience in customer demand. Management highlighted continued execution of the Velocity Growth Plan, with advancements in Experience of the Future (EOTF) restaurant modernization, digital initiatives, and expanding delivery services. These strategic efforts are aimed at enhancing customer experience and driving sustainable guest count growth. The company returned $2.5 billion to shareholders through share repurchases and dividends, signaling confidence in its financial position and commitment to shareholder value. While the refranchising strategy impacts reported revenue, the growth in franchised margins and operating income suggests a more efficient and focused business model.
Financial Highlights
48 data points| Revenue | $5.14B |
| SG&A Expenses | $533.10M |
| Operating Expenses | $3.00B |
| Operating Income | $2.14B |
| Interest Expense | $236.80M |
| Net Income | $1.38B |
| EPS (Basic) | $1.74 |
| EPS (Diluted) | $1.72 |
| Shares Outstanding (Basic) | 790.90M |
| Shares Outstanding (Diluted) | 798.70M |
Key Highlights
- 1Total revenues decreased by 9% to $5.14 billion, primarily due to the ongoing refranchising of Company-operated restaurants.
- 2Net income increased by 13% to $1.38 billion, and diluted EPS grew by 17% to $1.72.
- 3Global comparable sales increased by a healthy 5.5%, driven by positive performance across all segments, especially International Lead Markets (+7.8%) and High Growth Markets (+4.7%).
- 4The company returned $2.5 billion to shareholders in the first quarter through share repurchases and dividends.
- 5Progress continues on the Experience of the Future (EOTF) initiative, with approximately one-third of global restaurants modernized, and half of U.S. restaurants planned for completion by year-end 2018.
- 6The adoption of ASC 606 (Revenue Recognition) is expected to negatively impact 2018 franchised revenues by approximately $50 million, though the impact in Q1 was only $5 million.
- 7The effective income tax rate decreased to 27.1% from 32.8% in the prior year, benefiting from the lower U.S. corporate tax rate.