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What Drove McDonald’s Revenue in the Third Quarter?

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Oct. 24 2018, Published 10:03 a.m. ET

Third-quarter performance

In the third quarter, McDonald’s (MCD) posted revenue of $5.37 billion, outperforming analysts’ expectation of $5.32 billion. The better-than-expected global SSSG (same-store sales growth) of 4.2% helped it outperform analysts’ expectations. However, year-over-year, its revenue declined 6.7% due to its refranchising strategy.

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McDonald’s revenue across the segments

  • United States: The US segment posted revenue of $1.93 billion, which represents a fall of 4.6% from $2.02 billion in Q3 2017. Due to refranchising and the closures of underperforming restaurants, the company operated 239 fewer restaurants during the quarter, which lowered the segment’s revenue. However, some of the declines were offset by the net addition of 124 franchised restaurants and positive SSSG of 2.4%.
  • International lead markets: The revenue from this segment declined 1.5% to $1.94 billion during the quarter. The company operated 112 fewer company-owned restaurants in the quarter, which led to a fall in the segment’s revenue. However, some of the declines were offset by the net addition of 168 franchised restaurants and SSSG of 5.4%.
  • High-growth markets: During the quarter, revenue from this segment declined 21.3% to $1.04 billion. Due to refranchising, the company operated 57 fewer company-owned restaurants, which led to a decline in the segment’s revenue. However, some of the declines were offset by the net addition of 456 franchised restaurants and positive SSSG of 4.6%.
  • Foundational markets: The revenue from this segment rose 4.6% to $458.7 million during the quarter. Revenue growth was driven by the net addition of 251 franchised restaurants and positive SSSG of 6%, partially offset by a decline in the unit count of company-owned restaurants by ten units.

Peer comparisons and outlook

For the same period, analysts expect Starbucks (SBUX) and Wendy’s (WEN) to post revenue growth of 10.2% and 31.7%, respectively. Revenue for Jack in the Box (JACK) is expected to fall 47.9%.

For 2018, analysts expect McDonald’s to post revenue of $21 billion, which represents a fall of 7.9% from $22.82 billion in 2017. Strategic refranchising is expected to lower the company’s revenue.

Next, let’s look at McDonald’s SSSG in the third quarter.

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