McDonald's (MCD) 27 Jan 222021 Q4 Earnings call transcript

Hello, and welcome to McDonald's Fourth Quarter 2021 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded.

Following today's presentation, there will be a question-and-answer session for investors. [Operator Instructions]. I would now like to turn the conference over to Mr. Officer Corporation. Relations Investor Cieplak, for McDonald's Mike Mr. Cieplak, begin. you may

Kempczinski; thank for everyone, and With Officer, Chris me Hello, Ozan. Chief Chief us. Kevin Officer, President on you are joining and Financial today the Executive and call

call, of our mentioned available a X-K with release as on along comments the our filing As of on Both reconciliations our and call to website, earnings today. GAAP statements any apply those corresponding the measures measures. forward-looking on reminder, today's non-GAAP in financial also documents their are are

Following your via prepared is conference being will Chris. now remarks also this morning, it website. and our questions. call we take turn webcast replay Today's [Operator to I'll Instructions]. for And being recorded over is

more that past and that next XX of clear I be new year behind Thanks, Mike, digital brand further the Accelerating significant scale Arches, the a different, we people, our our growing by strategic envisioning than when many and of to at never foster continue and ways into our makes a more investments competitive been used ownership agility record-setting importance McDonald's serve we capabilities. inherent gets our in a many than caused system's we of time and apparent. McDonald's the purpose Guided clear witnessing going disruptions our by better good said for the great us beginning chapter there lean the momentum serve the advantage. has it's the for power to McDonald's, on the was Despite local to performance customers, little our McDonald's ago, McDonald's that and it's year morning, of XXXX brand the were might system, of McDonald's A brand. operating and even demonstrate to this the while and we strengths gets leveraging COVID, of the strength tough, what become feed strengths part our chain, communities dimensions, build communities our right The made our of and the our supply going now. to plan, months from everyone.

MCD are year experiences first delivery the we of down Arches laser-focused core the the system, In for as our to create on XDs made strategy, drive-thru great our menu, our and a marketing, doubled growth our Accelerating pillars. digital, of seamless, As and full we maximized memorable on the committed strides to customers. we

broad-based driven in Our focus has the XXXX. on growth MCDs

XXXX anticipate in will continued exacerbating be world, will of year a we and endure. challenges return many markets a delays. While the that creating our surge of of uncertainty experienced restrictions progress, and around we are COVID-XX also shortages supply XXXX the of in expect we chain A labor cases that in many

consumer economics. rising putting levels Additionally, inflation are pressure on restaurant

volumes franchisees foundational the ahead. Arches and Focusing expanding the our And to flows, and pressures unit on executing withstand and strong with advantages first safety growing our positioned are crew digital continuing will critical restaurant the operations, Accelerating year. company our customers health to to cash well the this on remain and average our of and put

a most of franchisees even never our Canada, they say for all-time every markets, in communities dedication scale past be banner our continued extraordinary have our it have employees, and U.S., XXXX system, McDonald's of of said most our every running of and franchisee the restaurants the crews. X keeping and proud Because to COVID. repeatedly including entire Japan. highs the hit our by cash leadership and our moments, been fact, restaurant years, of our was again. over customers managers U.K., Through the hour disruptions I've I'll despite our continued commitment more I while In flows difficult day. strong, unparalleled to top and hope caused year inspiration providing and and the and of service it suppliers, Germany and

In I than over billion; all-time $X hit performance the the mentioned, the we which Arches sales of let represents of how growth To global operating for system-wide sales success, to franchisee billion. expand cash Kevin. income and comparable to drove me sales Accelerating system-wide addition pass XX.X%, it U.S. of flow $XXX of billion on in over highs more growth; $XX

Chris. Thanks,

about years we've momentum. couple customer-focused the of the actions past talked we've taken strong to before, line As continue top over drive

fourth in a XX% sales were basis. the quarter nearly or up on comp X-year over global Our XX%

of share within off-premise the traffic competitive in where evident This As our International these XXXX. particularly fluid of most markets channels QSR a COVID result Markets, significant across advantage a is remain actions, major Operated this we've environment. since gained

U.K. where for quarter X% growth Our over Australia. and high in growth heightened strong and or X-year just interrupted the France, we on markets elevated and with IOM nearly quarter, restrictions comp Germany Later XX% starts COVID trends sales the and like had X-year double-digit the fourth Canada in were single-digit and stops recovery. basis, in a in government

Australian stay-at-home Reward date. of loyalty MyMcDonald's strongest of digital Mac. was continued growth drove delivery momentum, And quarter. in to being sales throughout menu began highly restrictions Canada October also month driven engagement. by our core featuring performance a significant to delivery such the the emerge items strong successful as consumers the marketing U.K. with launch program saw Double business Our and delivery Big from increased

loyalty half XX was as for contributor strong quarter this Our the of the XX growth our app comp prepare first usage a year. platform value drove in for Days, to launch Deals we and

X-year we conditions France, in highlighted rollout calendar app challenging continued remain confident Germany operating a but strong our As as market. sales share the our market strong of driven there third on the primarily with which comps opportunities. year still Germany U.S., we basis. in accelerating line, and we our average still about are benefit saw wraps positive a a increases. adoption all and In menu the price in quarter of McBaguette. the X.X% We by strategic for benefiting and growth, December, finished up and comp the featuring well sales check are I launch from digital as in dayparts, over new mentioned, with to menu advent from core chicken both loyalty digital Chicken France, premium across quarter And XX% the

digital continued Crispy Digital our to MCD the comps driver efforts pillars growth by complemented marketing U.S. in customers. remains adoption behind of and a Our drive Sandwich as strong U.S. Chicken with the were key McRib success

digital headlines build growing few sales to and digital continues over will on month. in a strategy success program our loyalty month Chris minutes. with share Our additional

$XXX,XXX this about highs line restaurant, franchisees cash in All top U.S. flows earlier. growth XXXX strong fueled has with of franchisee a in also of position our Chris growth weather around to in the to talked the pressures putting per record inflationary average

Developmental continues impacted with industry Japan quarter quarter. Turning over new government the China, its positive be and compelling China. with value partly introduction driven our our a in Momentum in of the growth from daypart menu strength accelerated Latin and of and Performance delivery offset while by however, sales sales to QX was programs which restaurant or Licensed International by XX% the COVID-related results largely on XX% the restrictions, to digital achieved XXth comp benefited fourth consecutive channels, Recovery significantly Japan comp across segment. items. negative in by dinner America, in up X-year basis. comps in disrupted

the restaurants While expanded opened for comps members, app we for over year-end we XXX negative a were quarter, successful presence with the year. and digital our for festival

Turning of to the P&L. costs. the Company-operated in a U.S., G&A labor result higher and commodity constant margins, currencies. for quarter for X% pressured the were as particularly increased quarter the in

by mentioned primarily plan I've performance as of for significantly exceeding increase year. As compensation expense result company incentive-based a before, the the driven was higher our

XX%, a Foreign currency per $X.XX of impacted earnings negatively one-time which share. the rate adjusted was after items, And by per results included share fourth some $X.XX for quarter. tax translation over quarter

restaurant full over the of across reflecting for XX.X%, of P&L of segments operating an was other year, billion adjusted billion. line over operating results generated and all mentioned, higher margins For Despite year, I income. restaurant $XX higher pressures increase $X.X some top the margin the margins

to profile. free back our it Chris, want I and touch flow CapEx hand on I cash Before to

Our timing overall $X expectations, billion, over primarily a projects. the XXXX for our slightly of original due than to little lower was capital spend

and improvements we've flow it the to With consistent strength free billion that, over years XX% in our of the was year. conversion With the Chris. to free of back cash global pass cash made business, our several XXXX, increase last XXXX. for nearly our to And business model $X.X I'll XX% over the an grew flow

At McDonald's, build we on ourselves Kevin. we've relationships long with customers. our prided the Thanks,

interaction what is digital drive food delivery. delicious fast, why relied through every or and That we to an channels that's whether on at through promise our and back, keeps loyalty, reliable. us hot, For in-person friendly opportunity decades, as them to they see guest off-premise our like with restaurants drive-thrus it's and app, service coming provide customer

to the again While with formidable when the make this to Arches That's customer us in quarter. each progress power we continue together our the own, come customer-recognized pillar real D of center. the C its at once strategy on is enabling Accelerating M, is what's and did as the combination

most creative And talented a For bar in taste, starters, we've excellence on for is Behind focused menu. trust. affordability, new our set family brand McDonald's marketing teams one We're the in to of world. marketing core industry. with iconic our McDonald's standard on the success marketing continues and the raised

performance we both beef that quarter, resulted gains and share saw market chicken. a for This strong in

top part business Australia, better. them and growth fries McNuggets XX% us in including next burgers. strategy. world and heart classics new markets over and continue the markets, famous in fresher-tasting total procedures IEO restaurants We've and We've our single Ireland. Customers deploy every that And gained central of successful pilot to years. the we in like like core told most our classics progress into standards the to of and Russia, tomorrow. To have complement almost and strength leaning implemented of the we're XX% they've globe couple share result chicken drive many our with core noticed U.S. cooking also Mac, quality, our taste market as on just They're of to XXX is U.K. now We've the well hotter, XXXX. markets. Big our chicken make aren't and across X across french beef, Iconic of of core the about our in excited the sandwiches share also improved and our by new restaurants in these over creating in our in of in Canada begun of as in U.K., business, our enhanced we're in that of XX in Our available markets XX McPlant make all excited market a growing focusing Chicken of McPlant since the McNuggets of favorites buns we're international that business. leadership a in our food chicken equities Chicken the after

being just than course, menu is Of about customer-driven items. more

make are to Our and more investments in digital our the technology the as growth continues digital customer paying in process. experience and engine off fuels seamless

era X And world's our just the the way $XX we're markets on expectations and of XXXX. sales Rewards XXXX, billion We're biggest consumers Canada, After adoption, of loyalty top a to to XXXX. the digital come enrollment Rewards of in from program. each in have more largest in now Australia. XX% and or system-wide saw Loyalty MyMcDonald's excited is and Our including than launched Germany driver single programs terms the bring than half months customer digital XXXX, XX acquire Dynamic active I digital in MyMcDonald's of the XX customer loyalty, first X strategy. has We U.K. which X/X a growth rewards. engagement. in their strategic frequency for been participation. exceeded legacy reengagement. the has our million our more first we're month, markets, months members of and earlier well customer increase in the in Yield. our to loyalty in over digital of partnerships XX%. importance building over few into U.S., driving channels and kiosks mentioned loyalty seeing and we're Moreover, greater fundamental drive-thrus self-order million that to launch, of loyalty customer and there Dynamic And the U.S., Last XX engagement will strong Mastercard instrumental and in on of we in building increase over new an have relationships. a meaningful enrolled customer announced With bringing been Yield of are earning members relationships

capabilities Mastercard we to with an our our customer and continue continues COVID more made experience. long As scale part before across the is us of better Delivery globe a integrate strategy expedite collaboration ordering consumers. a staple channels be broader bet and will our personalized across even providing to to for help assets, and

mutually XXX entered multiyear into partnerships footprint delivery the with our Eats our are app, and continued to value personal has more deals into beneficial in of experience. XX,XXX with and than even helping we and And our strong growth more momentum as customer DoorDash. expanded over quarter, providers, XXXX. to We've comps for fourth countries. long-term McDelivery global double-digit Our These customers franchisees, the unlock seamless and new ensure restaurants an our profitable of growth largest delivery. integrate we'll in X enable Uber long-term tremendous strategic in delivery And

access an especially contactless to essential Even digital delivery customers as safe, engagement our McDonald's. remain the drive-thrus seek as channel, and rises,

in see to pre-pandemic to drive-thru levels. higher continue the sales of compared We percentage a

have the our times XXXX. labor top investments foundational markets we're Kevin it confident to are in many the With XXXX drive-thru new back XXXX, turn slowed XXXX staffing service industry-wide off across we've talk throughput, they will our maximize drive beyond. since our system and and markets, average I'll challenges, XXXX Collectively, While the positioning greater U.S. MCDs across on technology. elements in compared paid to the to service market from our even XXXX to in times teams focused over and in about and availability outlook. improved to Kevin? made in growth

Thanks.

Accelerating said, the year, uncertain will strategy ahead our Looking Chris backdrop. confident we're to against that an continue Arches as growth drive macro this

term, XXXX constant overall sales over currencies X%, along XXXX, system-wide focused our operating our in of margin year. the of new gauge that planned with on contribute growth performance. comprehensive as operating serves about this expect restaurant long mid-XXs commodity to it We net and to openings XXXX, about and increasing digital strong expansion We're the will inflation we our In in most the as in other be top operating significant line our We've to technology and will range the drive low seen hampered top anticipate our few line the near be past investments margin will minimal percent momentum income years growth. continue operating by labor term. over as in X.X%

be XXXX, sales. As to continue G&A. and also to expect G&A strategically about of technology, in X.X% we invest our we digital X.X% In we're carefully systemwide to managing

both margin to Based year projecting to on expect for we effective XXXX, XX%. growth. we through to be in foreign our be G&A interest And continued legislation, operating Beyond currency to compared flat the XX% sales gain and rates, rate on current and under current leverage exchange tax we're tax XXXX. this interest between year relatively expect expense

full and in translation current and currency $X.XX on based we quarter EPS for Finally, will negatively anticipate $X.XX and exchange impact between the first between rates, $X.XX the $X.XX year.

billion capital spending change where our As few as towards the rates usual, of between time expenditures. unit will years. the XX% We XXX growth across anticipate restaurant year. only capital X,XXX will we provide $X.X openings over be We for this strategic openings. of than restaurant year. directional be About including our this net the new unit the anticipate about IOM restaurant first as IDL spend modernization segments. of efforts. we will X,XXX to in X.X% our of U.S. $X.X restaurant remaining where and Transitioning Globally, we will plan XXX open and the go of the restaurants, partners About China, Most this in expect will total for half year. dedicated including through to more with is guidance to roughly The move have of business, to in a openings. new markets, allocated completion growth our capital be reinvestment, U.S. net U.S. the restaurants, these to for spend the billion new

continue talked last to also flow growth about, And free the strong net continue we I to after just cash few we'll have CapEx than years. flow income in our as We cash XX% expect of to more spend XXXX. convert our the

invest grow in growing opportunities to dividend; capital to and shares. Going remain reinvesting business, third, in second, forward, with to existing our to during continue units strategy And repurchase new are and first, unchanged: beneficial allocation It's our ever. the system long-term our restaurants; McDonald's this shareholders. our along the priorities times confident deliver will the scale continue more like and of for sustained I that than that growth strength remain system and to profitable

to it Chris Now close. to back I'll turn

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But restaurant celebrate convention worldwide based seamless system we to their our shine cannot economic generation that one to other April the will in best X business to talent connects Arches. more and how opportunity this own first the customer in talk channels. a the on franchisees that the principles will way to into together is with The years as certainly barriers also digital where McDonald's brand in for business. of communities, be on representative the founding rooted be in customers answer in or Now we let system. physical of the is our equity the Orlando, will in will put our our come how the and leaders of about prepare we model: at our building time We experience it stand our of a central bringing create

diversity, this for commitment announce our inclusion, compensation a and As to a ways various employees. including equity learning X demonstrating metrics in senior areas: commitment our focused we leaders pledge and of month, DEI to development. and part a equal human brand's suppliers, initiative Last annual we're financing mutual capital commitment and into to throughout system, incorporating for franchisee and recruitment proud were ongoing pay in for recruitment,

backgrounds, the is optimistic as to that, to world. foster customers we the It's around you. new us groups historically markets number commitment the the to women feed with vision goal accelerate including take collaboration operated brand to a that Arches we'll and system, they this Our while and communities crave, they everywhere. all while the Kroc's excited franchisees come. Thank Ray I'm life about questions. years food treasure And for helping increase love. Together bring providing and they experience and the will and continue months opportunities create the from underrepresented will in of McDonald's and

[Operator Instructions].

from Charles Our first Andrew Cowen. with is question

a sales how due just of of start of of saw presenting reports the challenges, course seeing progressing. formal the around visibility. recognize But Great. ago, help forward you see a you outlook. X-K did in there and hours media you level as January, the the the staffing weeks at is provide a last usually, year you and out reduction the you see provide in working. just XXXX, not some set is guys given you to system strategy progressing probably outlook staffing little quarter X over kind sales Kevin, if margins commentary potential the that [indiscernible] what are XX% And XXXX the And just given sales this some around for operating that different lack And dynamic? U.S. really around how I quarter is the

Thanks, Yes. Andrew.

out Let talk Chris sales then and me having. was start XX% let Chris that of that about the thing with about some I'll labor came because talking you commentary, were that a of discussion the

as are with to of First, stops practices bit I let think and and pre-pandemic to to go commentary a the little our things starting our current hopefully I thinking quarters. back guess, lot that me focus say some of starts, is on not guidance of from a stabilize some

So U.S. our really go not current month. say a to kind But the and XXXX pleased try give and we're lot going in I back of would with performance in we're is what

put its You the as in heard, up both history. as in comp our annual in the the well prepared remarks basically highest seeing release, U.S.

momentum good we into really have start going XXXX. We as

over very cash X Our Their franchisees years. last the are flow has grown strong financially. XX% over

continue from a So going want The share areas. in a really chicken, digital we gains be good. U.S. sales we to been on It's to feel we've is XXXX market in It's few that loyalty. on and experiencing. focus where our perspective, specific

of really still kind heard service. people restaurants, considerable kind which well to You've in of grow. execution think as is it's our runway about as program, of has that the the And on and we operations practices loyalty about beginning the

in business U.S. I where we we think on are kind bullish So going of really momentum now. into feel 'XX, the right the

and are feel good restaurants franchisees well, hard. challenges this the but running working year. some still Our we are are pretty opportunities about from There the labor sales perspective,

to Omicron franchisees done Yes. would limited is environment. about are add, didn't really what of But are staffing only that any this easier. working make our a U.S. the in restaurants with as through operating now just And certainly of week, down X% job have I phenomenal our we hours. challenging a

the average significant progress exiting the number And ensuring been are that that got in work of restaurant. we that people they to actually have franchisees staffing they've able So size, with roster the in make XXXX need. our

is beginning 'XX into the than we year. of entering end the were Our greater of the roster size at where

challenging. So have is it a nice certainly job, done but again, franchisees,

a we're think of restaurants, I in vast XX% with hours. though, them, our of now having majority in place, terms good normal of the operating

is question Baird. from David next Tarantino Our with

couple-part X.X% uptrend call A this in X.X% would on could unit you curious and system here particularly for a to you'd the openings? growth sales. here certain that outlook. markets as get sales just only the terms explain translate understand sort on to bit strong system of And impacts I to growth? dynamics you on type perspective what in unit out I what's And to the the Kevin, year was driving a And from then just from of with there's question number IDL, that understand if be more there's would One, the but mix growth contribution wanted some big to there little run of outlook? respect secondly, of why rate whether perhaps

hope I I Yes. caught all parts. the

try. me Let

year about really has X.X%. So obviously, that current is you more growth it's but -- XXXX, really it's unit will more year year, prior -- unit the I about by current think think year growth we've current than impact. if growth be our said, some And sales it, -- for driven

lower certainly U.S. volume where about our markets. of either we So I we're the up China. this X.X% than a think if about is little you are open of in year Those we've growth. plus those will said of unit that said is opening are is we're mean, Part European openings year X% give -- about mix. XXX what us at growth that sales or generally of most last about opening,

the unit rate drives difference the that sales. of contribution so growth And and between system-wide

of major growth. other forward, give earn contributions XXXX, same and China, openings of in where -- chunk We those Going units grow where there's new our X.X% is That in openings. would and even to Australia we unit places our of little be volume. accelerating system-wide That's dynamic opportunity still I about and a And markets. X% contribution growth U.S. our lower the China really Canada, are will a will in to say of those good we are to believe post returns expectation large France, sales bit U.K., opening, besides significant markets, about X%. the on most again,

So good of capital. from our perspective, use a very it's

that's what so going see we'll And forward.

next with from Our Eric question is KeyBanc. Gonzalez

in the per I you level mistaken. $XXX,XXX unit, think I'm if which flow not you increase I think mentioned the store U.S., puts around in cash $XXX,XXX

occurred the and run rate So given in obviously, that company there's the XQ's some the seasonally was on lower margin. part of early likely overearning year,

you how much that in to terms XXXX? you're So in hold how commodity to of now labor you can system? talk pricing the much seeing right about And And -- on expect and is pricing in how what inflation? of

a between lot pricing. Okay. There's there definitely and in flow cash commodity and

Let me try there. things and hit a few

Let It an get restaurant pressure to It point to me for basis. into did we is fair perspective say $XXX,XXX is going over is flow with individual about say, unit $XXX,XXX Again, because -- there on to cash does about start flow cash the looking XX%. the that, X-year year. up cash our XXXX. over a your commodity up period, it's

were increases pressure in that will the expectation that a is up XXXX, somewhat. of XXXX progresses, U.S., year for food in the double will single be XXXX. half digits or Just more costs about X% Most high in ease we expect forward of And our for be or year. pressure If our to in perspective, give of to and the to that paper that look as the about first we year. the

and increase paper the similarly a and XXXX, around supposed side, costs food saw be double similar increase in more On also just in in we year. that XXXX, international about X% the is to in give perspective, a early to pressured

franchisees, that again, advised that's think our approach. a various margins the pricing to research environment, certainly value cost take We more a the landscape, But of either pressure, decide take customer flow consumer-based pricing making also. early flow. times that to is generally pricing one pressures restaurants. sure I try you will it cash a provide obviously cash we gained we're We for both cetera, customers XXXX trying perspective, third in certainly, some is on good ratings or that. a et with versus their And thing do our remain eye most They're small conditions, take account at pressure, on individual margins therefore, is year, So pricing close and increments We methodology balance that. on keep and prior important to know away there the expect they or certainly value and wipe again, economic that used on really, mechanism what and at market and to we a time. From in into by don't it high. competitive lot our party,

Our have on idea to obviously, important getting value and of for customer rises. value score lot inflation good sure well for continued are us metric to really they're because, make the as providing money, looking customers a our that's of that ratings a

that's of So the dynamics pricing on. that some go

Glass from is question next Our John Morgan with Stanley.

think think how contributed example, a years, that maybe you've I you 'XX? what wondered way the think that Is impacts sales in seen in about on -- markets in if in for quantify 'XX you've how of and about may you U.S., early just stages earlier on markets, a benefit system various for 'XX to loyalty the later loyalty, there had about benchmark, like growth or where has a as that the France, for as their we beyond? sales example, in of how number to

Yes. about we're what with Thanks, loyalty. excited We're it's seeing John, Chris.

excited us for us think I two get about it. things

into going consumers seeing their end we with The stronger. up the are McDonald's loyalty first program, is satisfaction is our who that

we able through not us, says they're we're loyalty, for what a feeling the they personalization value but also of just deliver to the or that because might it that and something is any providing them important so experience. offers that's rewards able of are, to the to MyMcDonald's enjoying them, get, be And

first point. So that's the

this The the a ours that about brand power in like the frequency. biggest talked of, XX% being is so in and second our markets, point, is call able you that of where drive about or to we've it, past, loyalty with reach have

are to comments. are seeing frequency us, nice about in I as made And deploy my we so XX%, for we as benefits able loyalty

into users on get bring we're of programs, And doing in comp more of that, active we're ends we of the just excited contribution that monthly engaged what can to our users. the as a in restaurants is successful finding about focus, we will we're that's degree ideas bigger, quickly And of where coming how so what the of active be loyalty. customers And can up contribution finding comp function in our seeing. but that terms

Our Dennis is from question next with Geiger UBS.

guess just more Chris, the I year broadly U.S. in digital general. on within loyalty And thinking this a piece. the follow-up about

this drive-thrus, the sales focus we beyond. cost far focus of given in mentioned to, digitization of general Is that that some to contribution the can and the and where your digital managing go and even that that just investment you then, get sort loyalty that 'XX the that of does given further margins, addressed? continue the gains the to saw of to and in earlier increase view to savings, the addition answer even in 'XX, you again, over year the other as As maybe time, kind

see trend business our definitely that's long-term macro of affect channels. going at We XX% digital Sure. now to as our about through digital We're is business. broadly more the

to grow. is number going that think to continue I

where in in markets very at in some where are business, close, that France, about right it's have U.K. is the like number north like like XX%. of others the We XX% of China,

of part his physical big able of I we to what digital opportunity the experience organization our It's is for as to with last made going digital Customer more a us Manu I is think because earlier Global be experience. create move to a long-term the meld So Officer, a do. and year, seamlessly think And the Chief you play. part why, that's know, to is

I do now, transactions, a So the for it And that there's on focus -- up experience. opportunities operations lot about there's of think opens can what right I think excited do what as of side can for it more as do. you we're us, your digitize digital do customer on the But well.

this to about for so And us, for be years going come. is talking something be to we'll

Jared with Sachs. We're to Garber from is Goldman going Our move next question on.

from Our next be are question there, you Jared? will --

Yes.

to and of of about seeing to and the labor sense free growth. flow staffing But Sorry maybe what respect unit issue. so availability chain? with in supply get construction ask a terms to really a phone demand wanted I a issue. about Obviously, you're had that. permitting I strong, wanted equipment or a the not franchisee environment seems question cash or

fair comment. a It's Yes.

my had was we more in prepared think anything. XXXX lower that originally projects of just mentioned remarks, than was I our for bit a CapEx really was it -- I little little a than anticipated, to and due timing

little cetera. to. to from materials fair how and than longer, to that say, at et it it a construction dealing I'd labor used is is to think permitting issues That's getting I construction say bit everything firms, supplies with taking

did get better, not see little back And XXXX. in sense things to starting of that it's pre-pandemic. where My to but it's is there we still were -- so some a bit

an a little related we construction the restaurants. but remodeling pretty of on kind to longer the feel we both So sure we've from chain to CapEx eye bit and now and that right taking supply permitting those, everything progresses need perspective. a expect equipment advancing it's opening both technology the openings, the to and to good all we'll year still of about getting keep from as of that way But provided make guidance is those for we

is Bernstein next Jeff Our Barclays. with from question

and the up pricing the Just gave commentary, appreciate you and follow wanted color on commodities. inflation to on I

shifting little bit more just So labor. to a

XX%. ago you're stores a the was mentioned you know comment weeks think I I maybe U.S. X% down only of couple with now hours operating in reduced the

just whether elasticity. more there's relates can if pricing, inflation to So you that, maybe And that some I'm any XX% still in terms of on color in similar improvement year of 'XX, the just as and expect wondering if to you provide color you provide can it another 'XX.

I price X% would running comfort above were in historical be you think 'XX, your I which zone. think

what So there's end. any lower are 'XX, your just the whether I'm affordability thoughts for wondering concern about on

and I'll Kevin Sure. pick a up I as of will well. address on then think couple couple a those,

number comment, know would when I that referenced we've But that Omicron. actually I had was interview, So of report time -- was had in made, we the that that December. progress I And the I that out in terms XX% I point out, actually, mid-December. that came were the later. that the on was peak of middle

we've call need again, of staffing the to so, weeks away of it, think, or the terrific our just ways franchisees had ability the I where, done, X to So X running. on job keep that continue that's to talent into restaurants about weeks finding they side. the have a restaurants work And to get

so is we're X% now with And restaurants at, hours. of is that limited which this where

the of we in from be in as for needed with seen been certainly you we've able part has last of labor we know, year, back think April do to us, that up And size, went to roster I move there about leave that the McOpCos, inflation. XXXX teens, year were standpoint. the to you've where a what as expanded McOpCos, that announced, we low And higher to saw point. a We from going progressed year I'd the up take call in -- had increases it, average are similarly franchisees McOpCos. our as probably a wage in labor say, on at mid-teens tick in inflation,

around got value Joe time focus is we people good And that work about lot reimbursement. and sure our our is the make making that in this, also just things beyond restaurants. proposition sure and off, like paid and I other on the Things did that of we've wages, the on there. of Archways to and a One doing can talking get reward be things what the recognition we team and our to tuition though, best with we franchisees employee do proposition, a U.S. did think

of make is focus things engaging the value progress. allowed just cumulatively, All and those on us proposition wages, with crew what the to employee the

to Certainly, thinking expecting thinking we can put pricing, you you our we're about continue is into tell pricing that, year, we're I'll about this that As going do let but Kevin wages. be on go as to we how are anticipate there more that. that pressure on

Yes.

a Chris' onetime, last there But need the are event intent to kind to Right was adjustments year. if you effort our like to in we had onetime will, have point, to a or wages. similar So isn't adjust a do do paid being we of that that to people's folks plan now, as this XXXX. compared concerted is sure make what level industry, continue to specific at

So of price we And we to in is of And little so. X% what for commodity line hold. relatively those have kind taking price the the do a have that if where of had was food-away-from-home will That perspective X% the U.S. over as onetime consistent with was or well deal for in you for bang, see of positive sales XXXX. with similar and what as increases we the pricing we first we that the up see was flow-through or food X some months, competitive ended XXXX, labor saying been kind pressure, pricing historically on an to won't will. from kind Again, the continue increases a inflation with we of increases of have paper in year year the big had the XX% to perspective, kind From just to but seen? I to we've that XX% and eye flow-through with that keep continued environment. in our to

price one, things: as are standpoint. as on We primary coming well we versus understanding really they're reacting at competitive just that's a customers how research from as So two, both as then take increases. we value close keep where cost from are transaction customer where and pressures. far X And as whether still eye they the a environment look how we view

the as it And we'll to so look into XXXX. continue that's go way at we

from Evercore. is David question Palmer with next Our

see ultimately, sense with is U.S. you that much a in rate users What's What goal purchases picture, going give were to your user get to that ID quarter? customer the higher? loyalty future mix? other the active of just Is going. us tools? the And loyalty or of in And maybe where your your change what of loyalty loyalty step at percent drive-thru the bigger

Yes.

question. percent good haven't that a terms of consumers that's of the actual before It's I in gotten were So loyalty consumers. one

see me for I do probably that program when probably of the loyalty say, in usage that. now, different we precisely is for I people best way. don't app number. they we right I the have. which the U.S., in maybe that I app know you opting Most would think at look think a when our proxy usage, certainly But

mid-single in And the now that so app right on right now. digits number usage running is

I a that's I But and on give the Investor for you So as team with that Relations as proxy can think Mike that's can up the something percent. certainly, probably good well. as follow

Our is Bank Senatore with Merrill Lynch. America Sara question from next of

drive expecting of and made related to sort pricing. margins leverage and margins G&A commentary The about of question like operating A couple about you higher.

high in of So the the to lower be idea the range? maybe X%, longer we specifically I or kind that range I think And -- expectation. as Are one, but previous should it should of which right your towards mid-XXs is, maybe to in that related And the than given about part end? is was how still the is low we think G&A, question guess, no the an taking allusion is that place, is, cash right that know -- to are, what on now there to with strong of you're franchisee in kind strong price aggressively? your I competitors that said advantage? respect any your to ability the thought guess, to flows elasticity, your of to performance your how And screws press cash given really, is I you instead turning you but time seeing expect price terms

back come and on Let me the I'll pricing. start first with part to then the last the one,

So well here increases eye at which it by compared would way at when we to the are talking focused our about. about an what things those we kind look our pretty is by on talked you versus I still and competitors. think And item, even about of certainly you we've we with been increase that the in what certainly prices competitor, But on every by competition price keep XXXX, positioned kind look one of do of is absolute is.

the what so people XXXX, I as again, it's standpoint inflation think a helps And is value And value. potentially will be hitting than of continue long way harder in really important the in hit perspective a us that research consumers time. and customers from is view to

making of continues be strong. sure cognizant that proposition very to we're value so our And

increases just look at compared And to so we absolute kind pricing do also. of

very And in been we add, the last call. in are are just several we would position. mean, mentality. as we I a the years on where we a I have Yes, talked about in strong we've as the you XXXX, outcomping share-taking into go noted, U.S., had I industry. this

the us message at on team my as are think better create further because an so us for to about And we to continuing to ways U.S. even separation relatively between and is I find competition, the position that. How well. are to be going to component, this in one is But they go things and but there Value we that? about our doing continue are take share. other can certainly, expectation year aspiration

operating was, Right this it 'XX to 'XX. think our been while -- where Right if about. investor on, continue expect sales. on we low think we've in all God from G&A to being, Once all of operating I inflationary fall remember that XXXX, willing, the mid-XXs. now, to little get margin in guidance I now, the ages about margin. that's both the increasing talked is margin normalize, continue the to correctly, -- is just certainly seems operating meeting, We we're on we're leverage talked a say, we pressures those, going expect that certainly pressured bit increase for at point. point, 'XX of it I I'll Because and for mid-XXs. and And like ago this we've giving to

operating mid side. back to pressures, that labor low that is we X.X% year sales, able 'XX on look, will margin go on and we side. commodity of to -- mind, compensation. environment high we which X% on mid-XXs around still at that been mind, good feel being think We in of both X.X% leverage really inflationary sales unusually also leverage to getting come is a continue I when about of certainly our that. that where a to So to in G&A in little and But we get And back get with for driven year, sign the the the incentive that of continue help out and is XXXX talking -- we this us in. to those, about to then during most good leverage range we'll sales Same then for was remaining by grow inflation We've our were bit came the held be the to that by, X.X% able as be to leverage.

Silberman next Credit is Suisse. Lauren Our question from with

innovation playing thinking given How innovation related, menu the you're added you anything what limit in on then know environment 'XX? it's innovation, do a a to And over complexity? talk the you we've of overall bit. So somewhat around hacks seen philosophy you you in the But your see SKUs adding recently of this in menu given up about promotion, seeing Can years? value come the announced pullback the without discounting couple about are wanting I new items frequency year? so and new. competitive past role how

that in most -- of the are about excitement products So interesting consumer as majority on innovation, kind menu. we vast about. think we've for C our are our top are pandemic still ones consumer the MCD the saying sentiment, we global they to focus that if to they learned the XX% on our looking back or about just markets, of core Arches that of to with. An it, think drive thing our through lot powerful They're And consumers I be call to you those a equities. are buy continuing latest the familiar our Accelerating consumers, that still go strategy, needs so and is of see core the of because

the core into the so finding I've global I what consumer to ways news think, What adding love I loved to the about menu. we're restaurant. without our complexity plays hacks, And psyche, well Orders, that about Famous create

area. And doing so frequency. and ideas, innovations and of about be part drive way see keep going stay to items, menu hacks ideas I of as can need to with creative Those the think offers. kind to help the But doesn't focus that. new what certainly one that on are you're I continuing core like we we time just mean aren't go consumer excited driving think there focused a menu do primary limited That that going to do to us that

approach nationally and the value a on as complemented U.S. value U.S. our kind brought important proposition talking but local et of their fields. allows field the up, the cetera. There's in at really again, that DXXX lot have determine to And that for carried then side about preferences, you on platform That's the Right we breakfast specifically. still based the localized local local that's through a time. advertised value the co-ops particularly local now,

like level, So by you'll being a nationally see couple a local times a still lot X healthy competitive cetera. environment, you environment, few deals perspective, is had which crazy will a we of from local you'll recently for year, or value a My it's remains on relatively $X. And not value driven the a has et where discounting, see been, national then pulsed-in the hope been the -- see co-ops.

that while. of any seen a haven't We for

XXXX. seen And so different dramatically in anything you do have what to not our is intention than would

with Carril Chris from is RBC. question next Our

to innovation expand on from a what you think I perspective? initiatives about you while think and more you you're how balancing than better times, times So improve 'XX. with did menu can in levels, bit further seeing opportunities mentioned from service still do throughput XXXX strategic here? slow service other a And

challenges weeks, this think see did that year, think, environment, the we We that bit making of we that that is we've make service as of the so sort of in get we have of service the to up. have into -- Sure. times, a to can sure I market on to head see because just laser-focused need. on had times conversations satisfaction times. reducing important go in several we the I service -- is every progress every back little step market last And customer opportunities back the reduce reason a that's staffing operating that we when The we continuing

we're something focused is And that so all on. that

rooms put think an thing as we're as the pressure drive-thru. will the we is, open. off Right on Expectation that more extraordinary channels I'll that channels, more dining continue of other some as those I able in XX% example, takes of and open. the have service is of We like open our drive-thru pressure use U.S., XXXX. restaurants about the now, the closed had room room to to in the dining dining

that. the size able sure going need, at to that As and those the with staffing but to down. times I we make than And the continue as we're see -- to started versus XXXX, that we come be opportunity need think progress that able in we're start service expectation things, better we're we we we've do to we to are again, for the off is on think got where us we're there's showing back predictability to XXXX,

next Our Brian Oppenheimer. with Bittner question is from

what's And on in since how a My think frame these beginning segment. the segment you the business IOM markets been believe, And market does question this potential IOM the IOM you about world? overall drivers share of obviously, segment. up can primary But the COVID? much how the how gains? the of important And it post-COVID of strength relates you've several there's a to that large you update us of lot in taken share, make

pandemic markets I'll it's a in. talk little of to the And challenge the a a take as you mentioned, into them we've aggregate. it, was and Kevin markets. fair lot that across think think those and significant in of IOM, we IOM. fill always of about taken had there's it's I of bit lot a I momentum then can say in in groups But different share that going But to

we're been markets continuing hard their particularly competition. outperform that a have COVID, significant seeing these measure certainly, by While through to they're hit pretty

had of you And in in things so some we've out impacted. those has Australia, Germany with Canada. with us, to deal about think things rolling shutdowns dealing of like then for we're been as that

franchisees to and off As I comp is taking then to us our to share, of share through think we health going it's going take more environment. start move a the to normalized momentum be to and the allow those, continue of

is, only obviously, a I'd and of to different point, is your add point conglomeration The to Yes. mean, Chris' markets. thing I several IOM

is Germany markets like no the pandemic, places. U.K., that I'd been expect different to in assuming -- recovery significant throughout even we markets the of XXXX the we stops markets and and through are pandemic. markets major the in case, recover, that But have the through some that I think and progress the to Chris have continue recover markets say well year, Markets as restrictions. mentioned, throughout our I'm the needed And gained strong. Canada the more still are So like again, mode. expectation to have we share is be that, assuming nicely will most been year, more as doing whereas really strong France see the that

coming And again, of markets. those so strong out really hopefully a substantially the all in in of we, are place pandemic

Chris. a Okay. Thank for you, Everyone, everyone, Thanks, great have joining Kevin. day. Thanks, today.

This concludes Conference McDonald's Corporation Call. Investor

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