USA | McDonald's Corporation has issued a report outlining its Q2 results for 2024, which ended June 30, 2024.
McDonald's Corporation has released its Q2 results for its USA operations.
"We are confident that Accelerating the Arches is the right playbook for our business and as consumers are more discriminating with their spend, we are focused on the outstanding execution of delivering reliable, everyday value and accelerating strategic growth drivers like chicken and loyalty," said Chairman and CEO Chris Kempczinski.
Comparable sales results for Q2 were driven by negative comparable guest counts, partly offset by average check growth due to strategic menu price increases. Successful restaurant level execution and continued digital and delivery growth positively contributed to results. International operated market segment performance was impacted by negative comparable sales across a number of markets, driven by France. As for international development licensed markets, the continued impact of the war in the Middle East and negative comparable sales in China more than offset positive comparable sales in Latin America and Japan.
Results for 2024 included Net pre-tax charges of USD 97 million, or USD 0.11 per share, for the quarter and USD 89 million, or USD 0.10 per share, for the six months, primarily related to non-cash impairment charges associated with the anticipated future sale of McDonald's business in South Korea. It also included pre-tax charges of USD 57 million, or USD 0.06 per share, for the quarter and USD 100 million, or USD 0.10 per share, for the six months, related to restructuring charges associated with the Company's internal effort to modernize ways of working.
Excluding the above items, lower sales performance and higher Selling, general, and administrative expenses drove negative operating income performance for the quarter. Results for the six months reflected positive operating income performance driven primarily by higher sales-driven Franchised margins, partly offset by higher Selling, general, and administrative expenses. Results for the Q2 period reflected higher interest expense and a higher effective tax rate.
Constant currency results for Q2 exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyses business results, excluding the effect of foreign currency translation, impairment and other charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.
Comparable sales and comparable guest counts are compared to the same period in the prior year and represent sales and transactions, respectively, at all restaurants, whether owned and operated by the Company or by franchisees, in operation for at least thirteen months, including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodelling, rebuilding, road construction, natural disasters, pandemics and acts of war, terrorism or other hostilities. Comparable sales exclude the impact of currency translation and the sales of any market considered hyperinflationary (generally identified as those markets whose cumulative inflation rate over a three-year period exceeds 100%), which management believes more accurately reflects the underlying business trends. Comparable sales are driven by changes in guest counts and average checks, the latter of which is affected by changes in pricing and product mix.
Systemwide sales include sales at all restaurants, whether owned and operated by the Company or by franchisees. Systemwide sales to loyalty members is comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-owned and operated and franchised restaurants. Systemwide sales to loyalty members are measured across approximately 50 markets with loyalty programs.
Systemwide sales to loyalty members represent an aggregation of the prior four quarters of sales to loyalty members active in the last 90 days. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The Company's revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates. Changes in Systemwide sales are primarily driven by comparable sales and net restaurant unit expansion.
Free cash flow, defined as cash provided by operations less capital expenditures, and free cash flow conversion rate, defined as free cash flow divided by net income, are measures reviewed by management in order to evaluate the Company's ability to convert net profits into cash resources, after reinvesting in the core business, that can be used to pursue opportunities to enhance shareholder value.
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