Starbucks FY 4Q16 Earnings Call Notes

Starbucks (SBUX) Q4 2016 Results
Howard S. Schultz

China has enthusiastically embraced Starbucks

“Perhaps nowhere in the world has the Starbucks Experience come to life more powerfully and been embraced more enthusiastically than in China, a country we first entered 17 years ago. I personally observed this again firsthand on my visit to the market just two weeks ago. Starbucks stores in China are among our most elegant, efficient and profitable of any stores in the world, and China once again produced record revenues and profits and strong comp store sales growth in both Q4 and fiscal 2016.”

One of the few western companies that has been embraced

“There are countless examples over the last decade of western companies and consumer brands that have tried but failed to achieve relevance in China. Not only has Starbucks cracked the code in China, consistently delivering record operating and financial performance, but our newest class of Starbucks stores in China is delivering the highest AUVs, ROI and profitability of any store class in our history in the market. And we have created partner pride and a deep emotional connection among our customers and our partners in the Starbucks brand in China that rivals any market in the world. By building the foundation of our business in China carefully, methodically and respectfully, we are creating a growth and profit engine that will continue to accelerate for decades to come.”

We are all trying to navigate through a difficult time

“we are all trying to navigate through a difficult time. I mean I would label this time as just a high degree of uncertainty that obviously is domestically driven but has affected the rest of the world. John and I and Cliff just last week we’re in China and Japan, and Cliff and I will be in Europe next week, and I think it’s safe to say that wherever we have been, I don’t think we’ve ever witnessed such concern about what could happen in the U.S. as a result of the election.

And I think there’s no question, as I speak to other retailers and other merchants both in and out of our sector, that there isn’t one exception where everyone is experiencing, I think, a very unpredictable and erratic chain of events where it’s very, very hard. I think what’s equally hard, it’s very hard to cut through all of the noise and try and get access to the customer and try and get your message out.

So I think we’ve tried to be very disciplined and very thoughtful about how we spend our money, both in traditional advertising and social media, so that we are not in any way kind of getting caught into all of this. I think everyone is hoping that post the election, there will be a return to a natural state of affairs in terms of the consumer behavior.”

No doubt over the next five years we’re going to see dramatic level of retailers who can’t sustain their core business

“I was talking to Fred Smith just a couple of weeks ago about his situation at FedEx and he shared with me a piece of research which showed a significant drop in foot traffic on Main Street and in malls, not only domestically and around the world, as a result of e-commerce, the Web, and what I’ll loosely describe as the Amazon effect. As a result of that, you’re certainly seeing large companies and small companies not only not open new stores, but announce closures.

And let me just speak to that. I know this is a little long-winded but I think it’s important. There’s no doubt that over the next five years or so, we are going to see a dramatic level of retailers not be able to sustain their level of core business as a traditional bricks-and-mortar retailer, and their omni-channel approach is not going to be sustainable to maintain their cost of their infrastructure. And as a result of that, there’s going to be tremendous amount of changes with regard to the retail landscape.”

Scott Maw

Consumer remains under pressure

“So the consumer remains under pressure in many places in Europe and Asia as well as here in the U.S., economic uncertainty around the overall consumer environment, around the election, that continues to weigh on our customers around the globe. And I think we can see that continuing as we get into 2017.”

Chipotle 3Q16 Earnings Call Notes

Chipotle Mexican Grill (CMG) Q3 2016 Results

Steve Ells

Impairing assets related to ShopHouse

“Finally, we fully impaired the assets related to ShopHouse, which totaled approximately $14.5 million on a pre-taxes basis. We opened the first ShopHouse in 2011. And currently operate 15 ShopHouse restaurants in three separate markets. ShopHouse is managed by a small independent team, which was tasked with creating a compelling brand, which could develop into a compelling growth strategy and enhance long-term shareholder value. We’re proud of the ShopHouse team, the delicious food they’ve created and the excellent customer service they’ve delivered. But after operating in three distinct markets, and opening in a variety of trade areas, ShopHouse simply has not demonstrated the ability to support an attractive unit economic model. As a result, we have decided not to invest further in developing or growing the ShopHouse brand and will pursue strategic alternatives.”

We still believe in the approach despite ShopHouse

“Although the exotic ShopHouse cuisine was not able to attract sufficient customer loyalty and visit frequency to make it a viable growth strategy for us, we continue to believe that our approach to food, people and unit economics with the right cuisine, with the right concept, can lead to a compelling growth strategy. And we are optimistic that our other growth seeds, serving pizza and soon burgers, both of which have broad customer appeal can become further growth strategies for us. While this was not an easy decision, we trust in our overall growth seed approach where we can innovate and develop new concepts, with a relatively small capital investment and little or no distraction to the Chipotle business. ”

Montgomery F. Moran – Chipotle Mexican Grill, Inc.

We are keenly aware that safe food alone will not bring people to restaurants

“At the same time, we are keenly aware that safe food alone will not bring people into our restaurants. Instead, they come for delicious food and an excellent guest experience.”

Economic model has been weakened due to lower sales volumes

“Prior to last year’s issues, Chipotle had the strongest economic model in the industry. Of course, this model has been weakened due to lower sales volumes that we’ve seen this year. While it’s critical to fully restore sales volumes and keep improving them from there, we also know that we need to improve our economic model now so that we can provide healthy returns even at lower volumes.”

Mark Crumpacker

Introducing new restaurant design

“Finally, I’d like to report on the successful launch of a new restaurant design that has been in development for more than a year. The new design is an evolution of the current design, with improvements in lighting, acoustics, seating, customer flow and the presentation of our kitchen. Additionally, the new design is more cost-effective with an average cost of $760,000, which is about $40,000 less expensive than our current restaurant design. We also anticipate a reduction in maintenance and repair as a result of this new design. ”

Adding second make line in restaurants

“the second make line that Steve referred to, we’ve had one in our restaurants for many, many, many years but the classic version. This new version is much more efficient. Whether or not you have the tech component added to it or not, it’s just a better layout. It’s got bigger bins. It’s set up to be more efficient, and that new line actually is slightly cheaper than our existing second make line. And so that line that is about all the technology component on it is actually a little bit cheaper than our existing line. And so we’re going to move quickly to have all of our restaurants outfitted with that new line starting in March 2017”

John Hartung

Aiming for high single digit comps in 2017

” we believe we can deliver comps in the high single-digit range for the full year in 2017. Of course, we hope these strategies will deliver an even greater sales increase.”

We are confident that we can fully recover our restaurant margins

” We continue to believe we can, over time, fully recover our restaurant margins as sales recover. From the unit economic standpoint, these projected results would lead to an average restaurant volume of around $2 million and restaurant ROI of around 50%. And the return potential for new stores is even greater as we expect the average new store investment to decline to around $760,000 in 2017.”

Tight Avocado supply

“Avocado supply declined during the summer. We began to experience higher pricing. Although we had hoped that this would be a temporary spike, in recent weeks though, supply has become even tighter and pricing has become much more volatile than expected. In fact, we’ve seen that some competitors recently have posted signs on their doors saying they are out of avocados altogether.”

McDonald’s (MCD) 3Q16 Earnings Call Notes

90% of restaurants have self-order kiosks in Canada

“In Canada… We now have dual point service and self-order kiosks in almost 90% of our traditional restaurants” Steve Easterbrook – President and CEO


Self-service kiosks and “Experience of the Future” will be substantially integrated into US market by 2018 or 2019

“In terms of modernized restaurants, it’s just over 50% of the U.S. state is modernized; we’ve got some work to do to complete that. And then of course within that we want to layer on top of the other elements, the broader [ph] elements, consumer facing elements of Experience of the Future, integrating that into the self order kiosk, offering different ways that customers can be served, they can place their orders, they can customize their food. So, we expect to start seeing that wrapped up through 2017 and literally the minute you convert the restaurant, we see a sales lift. So, yes, it’ll be a contributor, but we’ll probably be getting that full rate through 2018 and 2019 as well, which I think is a very strong program.” Steve Easterbrook – President and CEO


Commodity prices are favorable, but labor costs are rising globally

“While we continue to benefit from favorable commodity costs around the world, we continue to experience rising labor costs in many of our markets.” Kevin Ozan – CFO


Spread between eating at home and eating out is larger than it’s been in 30 years

We are also mindful that the current 450 basis-point GAAP between the costs of eating at home versus dining out is the largest spread in more than 30 years and maybe impacting consumer behavior. We continue to track these metrics and expect our overall menu price increase at year-end to be more in line with food-away-from-home inflation. Kevin Ozan – CFO


Restaurant industry is experiencing a squeeze because of broader economic issues, not just drop in cost of home dining

“I think there are broader macroeconomic issues of consumer confidence and just uncertainty of wage increases, the slight squeeze on discretionary spend with gas prices aging back up and healthcare costs going back up. So, I think those are sort of things that we see affecting customers and basically the spare cash they have in their pocket” Steve Easterbrook – President and CEO.


Mcdonald’s position in lower-end dining offers a buffer from the drop in cost of home dining

“The gap clearly plays a role but it’s not the reason for the broader softening, it’s not the sole reason. So, I think it is an element. But when you are lower average check business like we are, I don’t think that magnifies out the same as if we were a mid scale dining or fine end dining. So, yes it’s probably in the mix but it’s certainly doesn’t explain.” Steve Easterbrook – President and CEO.


Stability of McDonald’s value menu differentiates it from the more variable promotional offerings of the industry

“I’d say you can see out there, there is still some promotional offerings certainly around the industry. I think all of us certainly including us would like to see kind of just a stable platform where you can — that’s why we put McPick 2 in. The idea is to have an ongoing value platform that customers can count on and not have to come up with some discounted promotion, if you will, every now and then.” Kevin Ozan – CFO


Terror and security concerns have slowed tourist traffic and even domestic traffic in France

“we know that GDP is down in France but the different dynamics and given some of the situation and the security, terror situations they faced there, it really is creating some very significant dynamic changes in that market. Tourism, which has always been a substantial part of this fuel of the economy in France has really softened. And you see it in the hotel bookings and you can see impacted in certainly the more tourist areas where it’s the Southern France or Paris within our business where we do have a heavy concentration of restaurants. But you’re also seeing effect of the way that consumers live their lives, French consumers. So, there is a slight reticence to go into high density tourist areas because they’re slightly concerned at environment.” Steve Easterbrook – President and CEO


Delivery plays a substantial role in Chinese market

“China is a challenging market… As they are seeing, just as one example, they now have a substantial part of their business is the delivery business. And not just — originally we set up and established our own McDonald’s delivery service and that proved to be very successful. We’re now integrating into third party delivery providers and that has way further accelerated our momentum in business and customer satisfaction, as more people are getting used to ordering and eating at home.” Steve Easterbrook – President and CEO

Yum! 3Q16 Earnings Call Notes

Yum! Brands’ (YUM) CEO Greg Creed on Q3 2016 Results

Chinese boycott of Western countries thanks to South China Sea politics

“Now, let’s begin today with China. As we mentioned on our second quarter call, we were pleased with the results we saw through the first six weeks of Q3, as sales were ahead of our plan. However, tougher laps in the second-half of the third quarter, which we built into the forecast were compounded by an international court ruling regarding claims to sovereignty over the South China Sea. The ruling triggered a series of protests and boycotts intensified by social media against a few international companies with well-known Western brands. At its peak, the demonstrations significantly impacted store traffic in certain trade zones and this was during our busiest season. The impact to our sales was sudden and while difficult to pinpoint the exact magnitude of the impact on the quarter. Our best estimate is, there was a 400 to 500 basis point impact to the division’s same-store sales in the quarter.”

Confident in our ability to turn around Pizza Hut US

“Pizza Hut system sales in constant currency were flat and same-store sales declined 1% in the third quarter. The U.S. market was influenced by an unsuccessful promotion and the competitive environment. As we saw earlier this year, we know the brand can perform when the right product is combined with compelling value and the messaging is distinctive and disruptive. Now, I’m confident in our ability to turn around the Pizza Hut U.S. business. We believe the fundamentals are being put in place and now execution is the focus. ”

Been in China for 30 years now

“So 2016 marks the beginning of a massive transformation of the Yum!, a transformation that has been years in the making. The first step is the October 31 separation of the China business. This business began with the first KFC in Beijing, nearly 30 years ago and has grown to over 7,000 restaurants in over 1,100 cities. Today, it is one of China’s largest employers with over 400,000 employees, serving over 2 billion customers every year. In short, this business is a powerhouse with unrivaled growth opportunities in the world’s fastest growing major economy.”

Some people may be hunkering down ahead of the election

“Sorry. Look, it’s hard to say that. We’ve been doing a bunch of work just talking to different to millennials, Gen X, Gen Y, Boomers. I think where we’re what five weeks away from a general election, I think there’s just great uncertainty as to what’s going to happen in the U.S., in particular, as a result of the outcome of the election. It goes without saying that people are sort of trying to decide who to choose and what the impact will be on the economy. And I think people maybe just hunkering down a little bit.”

Micky Pant

Darden (DRI) Fiscal 2017 Q1 Earnings Call

Darden (DRI) CEO Gene Lee said there are too many restaurants and he’s hoping a few may shut down to draw some capacity out of the system

“I’m hoping that more inventory will come out of the system.  We’ve seen some big announcements of closures lately, and I also think that if you drive down the road you’re starting to see more restaurants closed. You also see more restaurants opened, but we could use some inventory to come out. That would be helpful.”

Doesn’t foresee the restaurant industry outlook improving substantially from these levels

“I would say that as we think about the industry, we prepare our plans, and we assume the industry is going to stay where the industry is going to stay.  We’re not assuming the industry is going to get a whole lot better.”


SK Additions:

Restaurants have to invest in experience

“I think the consumer environment, it continues to be difficult. I think there’s a lot of choices the consumer has with their discretionary income. And I think restaurants are competing against a lot of those other choices, not just restaurants. I think restaurants today have to stay — they have to stay relevant, and they need to continue to invest in the experience.”

Maybe some inflation in the second half of our year

“We still expect commodities to inflate in the back half of the year, more towards the fourth quarter. But we do expect commodities to be flat to low single digits unfavorable for the year. And, as I said, this quarter we had 150 basis points of commodity deflation. So, you would see that we’d have some inflation in the back half of the year. What does that mean to pricing? We still believe that we have the pricing strategy that’s correct for us. Overall inflation for us, when you include labor and other things, is still going to be 1.5% to 2%”

3% wage growth as market continues to tighten

“I think that your 3% assumption for wage rate in the back half of the year is probably the right assumption. The market continues to tighten.”

Average check is higher online

“Let me deal with the first one and hopefully I’ll remember the second one. We believe that it’s important to move as many people as we possibly can over to online ordering. We’ve talked about the importance of that because the average check is much higher when someone orders online and we can prompt them through that order.”

Don’t believe people aren’t eating out because groceries are cheaper

“I just have a hard time, when you think about our brands, that, where they’re experiential, that people are trading out and staying home because they can get their groceries a little bit cheaper. I’m just having a hard time with that.”

I’m not sure it’s really so promotional out there

“People say it’s promotional. I’m not so sure that the consumer believes it’s promotional because they’re still paying 2.5% more.

Dave and Busters FY 2Q16 Earnings Call Notes

Dave & Buster’s (PLAY) CEO Stephen King on Q2 2016 Results

Slowing of casual dining industry weighed on results

“You may recall that we called out cannibalization, competitive intrusion, and economic pressures related to the oil industry during the first quarter and these considerations continued into the second quarter as well. However, the macroeconomic environment and especially the casual dining industry also slowed relative to the first quarter and that also weighed our results.”

Planning on 10-11 openings per year

“As Brian mentioned, we have previously guided 9 to 10 openings, this year we’re now raising those expectations to between 10 and 11 openings. Of these 11 stores, 4 to 5 of those store openings are in markets, where we already have brand presence, and up to 6 store openings will be in new markets for Dave & Buster’s.”

Oil oriented geographies pressured still

“I mean, malls were actually better than the average. So that’s not a drag for us. And then I don’t know that we have exactly divided out Texas per se, but our oil oriented stores still remain under pressure, Oklahoma and Texas somewhat relative to remainder of the stores or the balance of the stores. Some of that once again is because of the fact that we did open a number of stores in Texas during the end of 2015 that are having an impact there as well.”

Labor inflation running above 2%

“I think given the wage pressure, it’s probably slightly above the 2%. I mean, I think in the long-term, we said that we need about 2% in order to begin the leverage margins it’s probably slightly above that in light of some of the margin pressure we’re seeing on labor. I mean, labor is — as Brian mentioned, we’re anticipating between 4% and 4.5% in the second half within that range also in the first half. So it’s a little more and without having kind of that fuel of e-ticket as well as some reduced reduction in cost of sales on the food side, the margin side gets a little harder.”

Sysco 4Q16 Earnings Call Notes

Sysco (SYY) William DeLaney on Q4 2016 Results

Sentiment for meals away from home seems to be trending downward

” These results were achieved in a market environment that is experiencing uneven trends and appears to have softened somewhere off-late, while consumer confidence in unemployment data points remain relatively favorable compared to a few years ago. The current sentiment for customer spending and meals away from home seems to be trending slightly downward.”

That said, restaurant operator expectations remain favorable

“Turning to specific restaurant industry data, overall sales trends weakened as reflected in current NPD and KNAPP-TRACK Traffic and spend data. That said, according to National Restaurant Association, restaurant operator expectations remain somewhat favorable.”

Merger agreement with US Foods terminated in late June

” our merger agreement with US Foods was terminated in late June, we regrouped as a management team very quickly, in July we put together the framework of a three-year plan and shared that with the investor group in September, along the way with our Board.”

Not sure what’s driving it but it just feels softer

“You know, we read a lot and try to learn as much as we can from folks that follow all the components of the industry. I just think it’s a little bit of a malaise. I just think it’s — you know, you’re going to have these cycles and sub-cycles in any point in time, and some of it, we’ve been going up against some stronger numbers a year ago, so there’s some math in it. But it just feels a little bit softer out there. I think people are being a little more cautious with their spend. Maybe the election, maybe — I’m not sure. So I guess I wouldn’t want to just conjecture here, but I don’t think it’s the Olympics, I don’t think it’s any one thing in particular. I just think it’s a little softer and it seems to be showing up in multiple places, so I don’t think it’s a certain type of customer per se or anything like that. I just think it’s one of these sub-cycles we’re going to go through and time will tell whether it’s a three- to six-month deal or longer.”

Don’t think the softening is necessarily related to over-storing

“You know, Mark, I think when you go back to 2009, 2010, clearly there was oversupply and overcapacity, and I think there’s been a pretty good correction since that time. I believe we’ve seen some modest reduction in restaurants — number of restaurants here over the last year or so. But nothing to the degree we saw for or five years ago. There may be a little bit of a modest correction, but I don’t think that’s an overriding issue, I think it’s somewhat self-correcting.”

Joel Grade

Deflationary trend likely to continue

“Now I’d like to close with some commentary on the outlook for fiscal 2017. The deflationary trend has been persistent over the last four quarters and will likely continue through the remainder of the calendar year, creating modest sales and gross profit headwind for the first half year. The restaurant environment appears to be softening and as a result, we anticipate modest case volume growth for the next quarter or two. Capital expenditures during 2017 are expected to be approximately 1% of sales, including Brakes.”

Thomas Bené

Just seeing some softening in terms of the slope of growth

Well, it’s not just what we’re seeing — I think it’s what we’re hearing from other folks that are speaking to their results, both in the operator side and some of our peers in the industry. So I think it’s just a little bit softer. I think the good news here: People are still relatively optimistic, both the consumer confidence in general and the restaurant operators. When you look at those indices and compare them over the last couple of years, generally, the outlook is favorable, but we’re just seeing some softening in terms of the slope of the growth, and specifically, we’re seeing it in traffic continuing to be flat, and check size up in some segments, flat in other segments. So it’s no one place, it’s a relative comment. We’re still seeing growth but it’s just not the same trajectory that we saw a couple quarters ago.

Panera 2Q16 Earnings Call Notes

Panera Bread (PNRA) Ronald M. Shaich on Q2 2016 Results

Ronald M. Shaich – Founder, Chairman & Chief Executive Officer

What matters to the consumer has been correct

“So here’s my point, the big news this quarter is that there is no really big new news today. Simply put, the news today is that our view of what matters to the target consumer has been correct. Our strategic plans to transform the business is working and our initiatives are performing. As a result, we can all be more confident Panera is positioned to deliver sustained double-digit earnings growth well into the future.”

Delivery becomes a powerful profit generator leveraging digital

“What’s more, startup cost for delivery at Panera are modest, primarily hiring costs given we can leverage the e-commerce capabilities initially built for Panera 2.0. And I should note we only accept digital orders for delivery. As a result, delivery quickly becomes a powerful profit generator at Panera.”

All about delivery

“We’ve come to believe delivery is the Usain Bolt of initiatives at Panera. It’s powerful, it moves very quickly and it’s getting out of the blocks fast. What else have we learned about delivery? We’ve learned that over time, our sales will continue to grow in delivery as awareness goes up, our profits will go up significantly with delivery as we generate more sales per cafe and, thereby, lower cost per delivery and the effectiveness of our delivery operations will get better and economically more efficient as we gain more experience, implement new technological capabilities and most importantly move down the learning curve.”

Delivery expands store development potential

“One other comment about what we’ve come to learn about delivery. Delivery expands our store development potential, as it lowers the eat-in and to-go sales required to meet the sales hurdles needed to hit our ROI goals.”

Andrew H. Madsen – President

2Q Comps 4.2%

” As you can see we’re all very excited about our progress and our results and we believe the power of our strategic plan is really best reflected in our comps and simply put, our comps continue to be strong as our initiatives rollout, despite a slowing sales environment for our industry. Specifically, the second quarter comps were up 4.2%.”

Different people will try to do delivery in different ways

“There are going to be a lot of people that view delivery as, shall I say, an opportunity to hop on the newest flavor of the month, and sort of cream this market opportunity, and they will do modestly in it and it will be a additive to them with low margins that they are going to be paying outsourced aggregators who provide the business. They won’t own their own customer and probably they’re going to be outsourcing delivery, and it will be incremental profit. There are others that are going to go at it in a mass-market way as Panera is, and so I think that’s one thing that will divide it up. I think, secondly, I think, there are some kinds of food that lend themselves particularly well to it, there are others that don’t. We think that soups and salads and sandwich work particularly well, particularly given the competitive landscape that’s out there. This food travels compare that to trying to move pizza, for example, this food travels particularly well.”

McDonald’s 2Q16 Earnings Call Notes

McDonald’s (MCD) Stephen J. Easterbrook on Q2 2016 Results

Expanding all day breakfast menu

“Over the past few quarters, we’ve heard from customers looking for more choice in the All Day Breakfast menu. Those with muffin sandwiches on the menu asked for biscuits. Those with biscuit sandwiches on the menu asked for muffins. We listened, worked through the operational challenges, and this fall, we’ll begin offering muffins, biscuits and McGriddles all day in all U.S. restaurants.”

Brand is improving

” In the U.S., we are seeing further evidence of improved brand perceptions according to a recent YouGov report that measures consumer perceptions across 1,400 brands. McDonald’s was ranked fourth most improved brand across all brands measured, and the most improved within QSR.”

Comps not as strong as previous quarters because of softening industry growth

“Beginning with the U.S., comparable sales for the second quarter increased 1.8%. Whilst modestly positive, this growth was not as strong as the last two quarters. This is due, in part, to the recent softening of the IEO industry, which experienced minimal growth for the trailing 12-month period ending in May at only 40 basis points.”

Consumer slowdown across most consumer segments

“on the industry, well, clearly, it’s been fairly well documented on the consumer slowdown across most consumer segments, to be honest with you, through the second quarter. And therefore, we are very mindful of our competitive position, the competitive gap. So it was important to us that we maintain that competitive advantage and fought for market share. We’re not immune from what’s happening in the outside world at all, but nor are we letting that deflect our focus on what really matters to us and our customers.”

There’s better value to eat at home currently

“I think the general sense is there’s a couple of things at play. I mean, first of all, there is a widening gap between food away from home and food at home, where the commodity decreases are being passed through by the grocers. So the food at home, there’s value to be had for families there, whereas eating out, there is a price inflation environment. So that’s a small part of it.”

Broader level of uncertainty in consumers’ minds

“I think generally, there’s just a broader level of uncertainty in consumers’ minds at the moment, both trying to gauge their financial security going forward, you know, whether through elections or through global events, people are slightly mindful of an unsettled world. And when people are uncertain, when families are uncertain, caution starts to prevail and they start to hold back on spend.”

We are affected by lower spend elsewhere

“clearly, we generate a lot of our own business directly, but also we do benefit from people moving around, going to the malls, driving around, going on vacations. And if people are reining in their spend across broader categories, that will have a little bit of a flow-through to us as well.”

Getting close to lapping all day breakfast launch

” From the All Day Breakfast launch in October of 2015, we’re now almost lapping that, that time and it’s continuing to give us strong incremental sales, strong incremental margin and cash flows and incremental visits as well, and the same with McPick 2. So I think these are now platforms that are just going to continue to work hard for us at that kind of steady-state ongoing level.”

Kevin M. Ozan – Chief Financial Officer & Executive Vice President

Facing rising costs in many markets

“While we are benefiting from favorable commodity costs around the world, we are facing rising labor costs in many of our markets. As a result, we are carefully balancing price increases with a focus on maintaining our strong value proposition, which remains a key pillar of McDonald’s brand, to drive guest counts. In the U.S., second quarter pricing year-over-year was up about 3% compared with food away from home inflation of 2.6%.”