4Q23 sales came in softer than expectations on impact from war in Middle East
McDonald’s 4Q23 sales came in softer than expectations on impact from war in Middle East
- McDonald’s reported 4Q23 sales miss on negative impact from war in Middle East and slowdown in core markets including US & IOM, overshadowing its 4% beat in EPS
- 1Q24 is expected to see tougher comps versus prior years as well as unfavourable weather conditions so far.
- McDonald’s reiterates 2024 guidance unchanged to open 1,600 net stores in 2024, reflecting a nearly 2% system wide sales growth in constant currencies.
McDonald’s (MCD US) released 4Q23 reflective of sales slowdown in emerging markets. Despite its 4Q23 EPS beat by >4% to US$2.95/sh, versus consensus estimate of US$2.8/sh, 4Q23 comparable sales growth slowed 3.4% y-o-y, reflective of an evident slowdown versus the first nine months of the year. US sales increased 4.3% y-o-y, International Operated Market segment increased 4.4% y-o-y, while International Developmental Licensed Market increased 0.7%, reflective of the impact of the war in the Middle East. Consolidated revenue rose 8% y-o-y, where systemwide sales rose 6% y-o-y. Operating income increase slowed to 8%, inclusive of one-off charges of US$72m from impaired software, and US$66m from Accelerating the Arches growth strategy. Excluding this, operating income rose 14% y-o-y (or 11% in constant currencies). Diluted EPS rose 8% to US$2.8/sh. Excluding one-off charges, diluted EPS rose 14% y-o-y. For the full-year, global comparable sales rose 9% y-o-y in 2023, reflecting strong growth across all geographic segments. Of which, US increased 8.7% y-o-y, International Operated Markets 9.2% y-o-y, and International Developmental Licensed Markets segment increased 9.4% y-o-y. Consolidated revenue rose 10% y-o-y, while operating income rose 24% y-o-y, with OPM at 45.7%. Excluding the said charges, operating income rose 16%. Diluted EPS rose 39% to US$11.56. Excluding the one-off charges of US$0.38/sh, diluted EPS rose 18% y-o-y.
2024 outlook unchanged. McDonald’s have warned macro challenges including high interest rates and inflations, as well as a slowing Chinese economy since last year. The Company maintained its earlier guidance set in December Investor Day, including 3-4% growth in US and international markets, as well as a net expansion of 1,600 stores in 2024. This implies nearly 2% system wide sales growth in constant currencies. OP margin is expected to range in the mid-high 40% range, with long-term target to see continued expansion.