McDonald's Q3 earnings are in… Here’s everything you need to know
October 22, 2019
The Cheese: Earnings Highlights
We’re celebrating 17 quarters of comp sales growth
Global comp sales are up 5.9%
We had positive global guest counts
1. The Velocity Growth Plan is working around the globe.
Broad-based momentum across our markets resulted in a 5.9% increase in global comp sales for the quarter, and our 17th consecutive quarter of global comp sales growth. This was complemented by gains in global guest counts.
Across every country, function and level in our System, we’re seeing improving discipline and robust levels of execution that are guided by our Velocity Growth Plan... performance that is punctuated by a culture that is embracing and leveraging innovation across every facet of our business.
2. In the U.S., the EOTF rollout is roughly two-thirds complete and we like what we're seeing.
About 1,500 U.S. restaurants have been converted to Experience of the Future (EOTF) this year and we remain on track to complete about 2,000 projects by year-end. The U.S. now has over 9,000 EOTF restaurants, or roughly two-thirds of the U.S. estate. The sales benefit from EOTF contributed to our overall U.S. comp performance for the quarter and improved customers’ experience with more inviting dining environments, easier and faster ordering, and greater hospitality.
3. The IOMs are delivering in a big way for the System.
The International Operated Market (IOM) segment once again delivered strong, balanced results. Comp sales were up 5.6% with every one of the markets growing comp sales for the quarter and nearly all of the markets also growing guest counts. Notably, the UK delivered its 54th quarter of consecutive comp sales growth, while France and Germany marked their 10th consecutive quarters of comp sales growth. From focusing on value platforms to maximizing EOTF, the International Operated Markets are a prime example of the promise of the Velocity Growth Plan.
4. Our IDL markets continue to grow... digitally and physically.
In the International Developmental Licensed Markets, which is now our largest segment by restaurant counts, comp sales were up 8.1%. Each geographic region grew both comp sales and guest counts.
Nowhere was the power of our emerging digital ecosystem more on display during the third quarter than in China. The market drove strong comp sales growth in part by delivering tangible, members-only benefits to our digital community, which now stands at 100 million registered members.
5. We’re driving hard on Digital... and our investments are securing our future.
With Digital, we’re working hard to fulfill customers’ desire for simpler, smoother and more personal engagement over our digital platforms – including kiosks, Drive Thru’s and our mobile app.
Our deployment of Dynamic Yield is improving our ability to offer customers what they are likely to want, based on time of day, weather and items already in their orders. Dynamic Yield technology is now in over 9,500 U.S. Drive Thru’s, with full rollout to nearly every U.S. restaurant with an outdoor digital menu board expected by year-end.
Another milestone on our journey to embrace technology to build a better McDonald’s for customers and crew is the creation of McD Tech Labs, which was fueled by our acquisition of Apprente. Our new team, based in Silicon Valley, brings first-mover advantage in a must-win area for our System: voice technology.
Apprente’s talent and technology comes with the promise of more efficient and accurate ordering at the Drive Thru, and a better experience for our customers. At the same time, we expect the technology to reduce complexity for our crew.
6. McDelivery is thriving… and there’s plenty of road ahead for success.
Delivery is a major area in which we are moving rapidly to capture changing consumer habits around service and convenience… and it’s working for us.
In fact, customers are now placing 10 McDelivery orders per second, on average, globally. The addition of multiple delivery partners in markets such as Italy, Canada, Russia, Spain and the U.S. helped these markets reach new customer pools. Delivery remains a big frontier for our business and we still have a long way to go, even with our existing customers, to encourage awareness and trial.
For 2019, we expect Delivery to drive $4 billion, or roughly 4% of global systemwide sales. That’s up from $1 billion just three years ago.
7. Our Culture of Innovation continues to plant seeds for growth.
Our strong performance in the third quarter – and over the past 17 quarters – didn’t happen in a vacuum. It’s the result of our people firmly committed to our Velocity Growth Plan, and the Culture of Innovation that is driving that plan. That Culture of Innovation is rooted in a relentless focus on the customer experience, making the jobs of our restaurant employees simpler and more rewarding, and building an operational foundation for long-term growth and competitive success.
Operational and marketing innovations have been embedded in our DNA since the opening of store number one in Des Plaines, Illinois. And it’s through a Culture of Innovation that we’ve been able to grow guest counts; strengthen our three legged stool; and build an enduring brand with a legacy of sustained growth.
The Bun: The Bottom Line
For over 60 years, the strength of the McDonald’s brand has been our ability to offer a compelling menu of delicious and affordable food, made with high quality ingredients and complementing that with hospitality and convenience for our guests.
A brand, at its essence, is a promise.
And our promise has largely remained unchanged over the years.
What has changed are the ways in which we fulfill that promise.
We are proud of the success we have shown in Q3 and confident in our plans for the future. But, this is not to say our company and our industry won’t face challenges ahead. We have before, and we will again. By having the right people in the right places, supporting them with the resources and investments they need, and embedding a culture of innovation in how we work, we know we can deliver on our brand promise in any environment.