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What Drove McDonald’s Revenues in Q4?

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Fourth-quarter performance

In the fourth quarter, McDonald’s (MCD) posted revenues of $5.163 billion—slightly better than analysts’ expectation of $5.162 billion. The company’s revenues declined 3.3% YoY (year-over-year). The strategic refranchising of company-owned restaurants led to a fall in the company’s revenues. However, the addition of new franchised restaurants and positive SSSG (same-store sales growth) offset some of the declines in the revenues.

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Performance across segments

The US segment posted revenues of $1.91 billion, which represents a fall of 4.9% from $2.0 billion in the fourth quarter of 2017. Due to refranchising and closing underperforming restaurants, the company operated 202 fewer company-owned restaurants during the quarter, which led to a fall in its revenues. However, some of the declines were offset by the net addition of 80 franchised restaurants and positive SSSG of 2.3%.

The international lead markets segment’s revenues declined 3.2% to $1.85 billion during the quarter. The decline was driven by refranchising of company-owned restaurants, which caused company-owned restaurants to fall by 107 units. However, some of the declines were offset by the net addition of 173 franchised restaurants and positive SSSG of 5.2%.

During the fourth quarter, the high-growth markets segment’s revenues declined 3.3% to $962.3 million. The company operated 52 fewer company-owned restaurants during the quarter, which led to a fall in the company’s revenues. However, the company added 473 franchised restaurants in the last four quarters. Additional franchised restaurants and positive SSSG offset some of the declines in the revenues.

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The foundational markets segment’s revenues increased 3.6% to $442.1 million. The revenue growth was driven by the net addition of 251 franchised restaurants and positive SSSG. However, the number of company-owned restaurants declined by two units in the last four quarters, which offset some of the revenue growth.

Peer comparison

During the same period, Starbucks (SBUX) posted revenue growth of 9.2%. Analysts expect Wendy’s (WEN) and Jack in the Box (JACK) to post revenue growth of 29.4% and -7.8%, respectively.

Next, we’ll discuss McDonald’s fourth-quarter SSSG.

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