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What Drove McDonald’s Revenue in 4Q17?

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Jan. 31 2018, Published 2:06 p.m. ET

4Q17 performance

During the quarter, McDonald’s (MCD) posted revenue of $5.34 billion, which represents a decline in revenue of 11.4% from $6.03 billion in 4Q16. Analysts were expecting the company to post revenue of $5.23 billion.

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Performance across segments

United States: The segment posted revenue of $2.0 billion in 4Q17, which represents a decline of 1.6% from $2.04 billion in 4Q16. Due to refranchising and closing down underperforming restaurants, the company operated 222 fewer company-owned restaurants in 4Q17 compared to 4Q16. However, some of the declines were offset by an increase in the unit count of franchised restaurants by 103 units and positive SSSG (same-store sales growth) of 4.5%.

International lead markets: During the quarter, the segment posted revenue of $1.91 billion, which represents growth of 8.0% from $1.77 billion in 4Q16. The revenue growth was driven by positive SSSG of 6.0% and the net addition of 214 franchised restaurants in the last four quarters. However, some of the revenue growth was offset by a decline in the unit count of company-owned restaurants by 144 units.

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High-growth markets: The segment posted revenue of $994.7 million in 4Q17, which represents a fall of 34.4% from $1.52 billion in 4Q16. Compared to 4Q16, the segment operated 1,763 fewer company-owned restaurants in 4Q17, which led to a fall in the segment’s revenue. However, some of the declines were offset by SSSG of 4.0% and the net addition of 2,095 franchised restaurants.

Foundational markets: The segment posted revenue of $426.7 million, which represents a fall of 39.4% from $703.9 million in 4Q16. Compared to 4Q16, the segment operated 407 fewer company-owned restaurants in 4Q17, which led to a fall in the segment’s revenue. However, some of the declines were offset by SSSG of 8.0% and the net addition of 466 franchised restaurants.

Peer comparisons

During the same period, Starbucks (SBUX) posted revenue growth of 5.9% while Wendy’s (WEN) and Jack in the Box (JACK) are expected to post revenue growth of 1.6%, and -41.6%, respectively.

Outlook

Analysts are expecting McDonald’s to post revenue of $20.92 billion, which represents a fall of 8.3% from $22.82 billion in 2017.

Next, we’ll look at McDonald’s 4Q17 SSSG.

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