Foreign Currency Impacts McDonald’s Quarterly Results
Fast food retailer McDonald’s saw consolidated comparable store sales and net income increase during Q1 2009. However, consolidated revenue and operating income fell, which McDonald’s blamed on the negative impact of foreign currency translation. Highlights from McDonald’s quarterly results follow.
Comparable Store Sales are Up Everywhere
McDonald’s reported a global comparable store sales increase of 4.3%, despite there being one less day than in Q1 2008 due to leap year. In the U.S., comparable store sales rose 4.7%, in Europe they climbed 3.2%, and in APMEA (Asia/Pacific, Middle East and Africa) they rose 5.5%. In the U.S., McDonald’s credited increased sales of chicken, beverages and breakfast, while in Europe the retailer cited increased operating hours and localized strategies among other factors. In APMEA, McDonald’s said sales were especially strong in Australia and Japan, partially offset by weak China sales.
Operating Income and Revenues Decline due to Currency
McDonald’s reported quarterly consolidated operating income of $1.4 billion, a 4% drop from $1.46 billion in Q1 2008. Revenues also declined from $5.61 billion to $5.07 billion, a roughly 10% drop. Although McDonald’s said U.S. operating income rose 6%, it attributed its consolidated losses to foreign currency exchange rates. On a constant currency basis, McDonald’s said operating income would have increased 5% to about $1.47 billion and revenues would have increased 2% to $5.72 billion.
Net Income and Gross Margins Rise
Consolidated net income for the quarter rose 4%, from $946.1 million to $979.5 million. Consolidated gross margins improved from 26.1% to 27.6%.
Q1 2009 Activity
McDonald’s had a busy Q1 2009. Activities of note during the quarter include an ongoing free coffee promotion in Canada, settling a potential shareholder resolution alleging misuse of pesticides in its U.S. potato supply chain, announcing plans to open 500 new stores in China in the next three years, and running a special Canadian promotion of a snack-sized Big Mac. On the negative side, McDonald’s faces a shareholder resolution criticizing alleged abuses of chickens in its U.S. supply chain.