McDonald’s 4Q16 Earnings Call Notes

Steve Easterbrook

Strong results in China

“Let’s turn to the High Growth segment, where performance was driven by strong results in China. We saw increases in comparable sales in the fourth quarter across all markets, resulting in a positive comp of 4.7% for the segments. For the full year, comparable sales were 2.8%. Notably, China had a strong quarter with comparable sales of 7.9%. We ended the year with solid momentum, due in part to contributions from the core menu and the strong value offerings.”

Last year’s Q1 results included a leap day

“, we are dealing with varying macroeconomic pressures and general economic volatility in many markets, including Russia and France. In Q1, well, results have included a leap day, favorable weather in many places around the world and a continued benefit from the launch of All Day Breakfast in the U.S. ”

Probably going to bring pricing back carefully

“It is a delicate balance, 2016 was a – there was a lovely cycle from the cash flow with commodities at an all-time low and probably as aggressive as we would be want to be on pricing. I think we are going to bring – you will see us just bring just carefully bring pricing back more in line with food away from home, which we begin to see now.”

We’ve got to simplify

“Yes. No. Thank you. Thanks David. Speed of service has declined slightly, it’s handful of seconds slower by the end of ‘16 and we were by the end of ‘15. So I guess there is a number of things we are trying to do. You will hear me talk about or heard me referring the thoughts around net simplification where if we are going to introduce new menu items, new ideas, we got to reduce the complexity by at least, if not more than the same amount. So our operations teams, particularly in the U.S. are deeply focused on that and just simplification isn’t just on the menu, it could be on different operational processes.”

Kevin Ozan

Food deflation will probably not be as favorable as it was in 2016

“Hey, Nicole. Thanks for the question. Yes, we do expect kind of the food at home, I’ll call it deflation to ease or not be as favorable as it was in 2016. The IEO industry is still projected to be relatively muted in 2017. But I think what it does is, as you know, we look at various factors when we look at pricing. We will look at food-away-from-home inflation and food-at-home inflation and competitors to determine the right kind of approach to our pricing. I think it gives us an opportunity to potentially gain some customers back that are right now eating at home.”