McDonald's Q2 Earnings Call Highlights

Key Points

• McDonald’s delivered mixed Q2 results: Global comparable sales rose 1.3%, systemwide sales increased 4% in constant currency, and adjusted EPS reached $3.38. However, U.S. comparable sales grew only 0.8%, below expectations, due primarily to inconsistent value-menu execution, operational strain and underperforming marketing.
• The company is simplifying restaurant operations, increasing digital and personalized value offers, and shifting marketing toward established value platforms after U.S. comparable sales turned slightly negative in July. Management said the issues are execution-related rather than a strategic problem.
• McDonald’s remains focused on international growth and expansion but pushed its 50,000-restaurant target to 2028 because of consumer pressure and higher development costs. It also introduced the McDonald’s NEXT framework and named Skye Anderson as the new president of McDonald’s USA.

McDonald's NYSE: MCD reported second-quarter global comparable sales growth of 1.3% and systemwide sales growth of 4% in constant currency, as positive results across all operating segments were tempered by weaker-than-expected execution in the U.S. business.

Adjusted earnings per share were $3.38, including a $0.03 benefit from foreign-currency translation. On a constant-currency basis, adjusted EPS increased 5% from the prior year. The company generated more than $4 billion in restaurant margins during the quarter and reported a year-to-date adjusted operating margin of 46.9%.

Chairman and CEO Chris Kempczinski said the company’s long-running Accelerating the Arches strategy has grown systemwide sales by roughly $40 billion and operating income by more than $3 billion over nearly six years. He said McDonald’s now has nearly 220 million active loyalty users globally and more than $20 billion in annual delivery systemwide sales.

U.S. Sales Growth Misses Expectations

U.S. comparable sales rose 0.8% in the second quarter, following a 2.3% increase in the first half. Kempczinski said the U.S. result fell below the company’s expectations, but characterized the issues as execution-related rather than strategic.

“We don’t have a strategy problem,” Kempczinski said. “We simply didn’t execute at the level we needed to in the second quarter.”

Management identified three main issues: inconsistent execution of its everyday affordable price menu, too many operational deployments that strained restaurant teams, and marketing programs that did not meet expectations.

Chief Financial Officer Ian Borden said McDonald’s began the quarter slowly as it lapped the prior year’s successful Minecraft campaign. In late April, the company introduced an under-$3 everyday affordable price menu and a $4 breakfast meal deal. However, awareness of the new value menu was below target, while restaurant-level execution varied across the system.

The company also reduced digital offers and removed its Buy One, Add One for $1 feature while investing behind McValue. Borden said those decisions negatively affected visits by some of the company’s most loyal customers. He estimated that value-program execution issues represented about two-thirds of the quarter’s traffic underperformance relative to expectations, with the remainder largely tied to its June FIFA marketing campaign.

Kempczinski said approximately 60% to 65% of the U.S. system was executing the recommended pricing architecture for the under-$3 menu. He said the company will work with franchisees through education and business reviews, including discussions of pricing execution.

U.S. comparable sales were slightly negative in July, Borden said. McDonald’s plans to respond with more national digital flash offers beginning the following week, more personalized offers for its most loyal digital users, and a reallocation of marketing dollars toward established value offerings such as Extra Value Meals.

Operations and Marketing Changes Underway

Kempczinski said restaurant employees were burdened by multiple changes during the quarter, including the K-Pop Demon Hunters promotion, changes to McValue, the launch of a beverage platform, and the FIFA campaign. The number and pace of deployments affected service times and customer satisfaction, according to management.

The company has removed several non-customer-facing activities from the remainder of the year to simplify restaurant operations and allow crews to focus on customer service. Kempczinski said operational improvements should be the fastest to address because they are largely within the company’s control.

Marketing adjustments may take longer. He said McDonald’s has limited ability to revise its third-quarter marketing calendar because campaigns are already underway, but is reviewing opportunities to make changes in the fourth quarter. The company expects to be fully positioned on its marketing approach in 2027.

Kempczinski also said McDonald’s is reassessing the balance between promotion-driven “borrowed equities,” such as entertainment or sports partnerships, and marketing that supports baseline traffic growth by emphasizing food, taste, quality and the restaurant experience.

International Markets Show Resilience

International Operated Markets comparable sales increased 1.5%, led by Germany, Australia and the United Kingdom. Borden said value menus, meal deals, chicken innovation and localized marketing continued to support results despite challenging quick-service restaurant traffic trends in several large markets.

Australia and Germany gained chicken share during the quarter. Australia benefited from its Korean Barbecue McCrispy limited-time offer, while Germany continued its Chicken for Every Moment campaign and launched a specialty beverage platform featuring crafted sodas, refreshers, cold coffee and Red Bull Energizers.

France again fell short of the company’s expectations. Management said the market is working to improve system alignment and execution, including through an extension of its EUR 4 Happy Meal offering and the return of nationally priced meal deals.

International Developmental Licensed Markets comparable sales rose 1.9%. Japan delivered its 10th consecutive quarter of positive comparable guest-count growth, aided by a loyalty program that has nearly 20 million 90-day active users less than a year after launch. Results in China remained pressured by a difficult macroeconomic and consumer backdrop.

Development Target Moves to 2028; New U.S. President Named

McDonald’s now expects to reach 50,000 restaurants globally in 2028, moving the target from the end of 2027. Borden cited pressure on consumers and cumulative inflation in development costs. The company remains on track to open about 2,600 gross restaurants in 2026 and described the current period as the fastest restaurant expansion in its history.

The company also expects incremental divestitures of company-owned restaurants in the U.S. and international markets as it evaluates the optimal mix of franchisee and company ownership. McDonald’s expects to begin realizing efficiency benefits from recent global systems investments in 2027, with the goal of reducing general and administrative spending as a percentage of systemwide sales.

Kempczinski introduced a new growth framework, McDonald’s NEXT, which focuses on improving food taste and quality, engaging consumers and fans in new ways, and simplifying restaurant operations to improve hospitality. He said the strategy is expected to be meaningfully self-funded through productivity opportunities and top-line growth.

McDonald’s also named Skye Anderson president of McDonald’s USA, effective immediately, succeeding Joe Erlinger, who is leaving after more than two decades with the system. Anderson previously served as chief operating officer of McDonald’s USA and has 26 years of experience across finance, operations, market leadership and global business services.

The company plans to provide further details on McDonald’s NEXT, refranchising plans and its longer-term cost outlook at its Investor Day on Sept. 23 in Chicago.

About McDonald's (NYSE:MCD)

McDonald's Corporation NYSE: MCD is a global quick-service restaurant company best known for its hamburgers, French fries and breakfast offerings. The company develops, operates and franchises a system of restaurants that sell a range of food and beverage items, including signature products such as the Big Mac, Quarter Pounder, Chicken McNuggets, McCafé coffee beverages and a variety of salads, desserts and seasonal menu items. McDonald's serves customers through company-operated restaurants and franchised locations, and it supports sales via dine-in, drive-thru, digital ordering platforms and third-party delivery partnerships.

Founded in 1940 by brothers Richard and Maurice McDonald as a single San Bernardino, California restaurant, the business was transformed into a franchising model after Ray Kroc joined in the mid-1950s and led the brand's national and international expansion.

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