McDonald's (MCD) 31 Jan 232022 Q4 Earnings call transcript

Hello, and welcome to the McDonald's Fourth Quarter 2022 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

Chris and you morning, President us. Financial Officer, With Good Ian and and joining Borden. Officer, Executive are me thank today for everyone Chief call on Chief Kempczinski; the

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

replay questions. prepared limit reenter I'll now, morning, Following additional is being this we over via remarks it for turn for and queue to will questions. Chris. and our take question website. webcast your conference call also being Please And one Today's to any yourself is the recorded

the Thank this demonstrate good are as of is down Accelerating core the year performance in which know commit to our the be exceptional M, the throughout and is the continued Arches impact our could segments sales sales XDs. to comp XXXX. in disrupt achieved XX.X%, marketing, on the at This unveiled Despite known the resilience businesses corner would predicted C, to and did growth delivered the Europe. count all three extent in a When macroeconomic guest growth time XXXX the growth and early we and as strategy have the we Europe year comp pillars world that Little results D’s, last and system pandemic the the of every our you nearly gathered to year year the full QX. McDonald’s morning volatility also globe, follow. which war maximize McDonald’s the strong of delivered would pandemic days double-digit anchored another strengthen challenging around X% testament We by growth These menu, working. strategy growth expected and of from of in would be our with recovery that globally, double in saw a we and with progressed nobody momentum everyone. particularly there year we across

potential XXXX demonstrated pillar. each growth performance Our that continued of

You have one heard of world’s is me growth the say pillar. McDonald’s greatest

In heard You've year, brands. we've is McDonald's to the even our greatest the excellence. more unlocked me of marketing through world's say one elevate creative ways last

to October, That across our most into culturally together fans adult scalable fans Customer Happy love drive and seen program the insights and growth. us in expectations. fair the trend tap markets and brands McDonald's for This of palpable Our are culture. say momentum one love and on was Flea it's with that campaigns into in our the continued Meal QX. weekly exceeded brought the with helping program the resonate drove create nostalgia ever U.S. Cactus highest for transactions relevant In Plant the excitement and Market collaboration digital our U.S.

can Brought more to or than and yet FIFA our markets whatever language worldwide. outcome the truth, marketing go game, XX launched Arches. to celebrate Cup, ever with culture the To global the to the the World fan participating largest whatever unite McDonald's? we of Want campaign another under Golden we life all

at was Cup of team their that time zone promotions, meaningful support fans was the aim were in. the McDelivery home and through to regardless relevant watching Our FIFA World playing that

top During ten we sales delivery markets. across campaign our saw in double-digit this increases

never campaign has picked the never Even so name, our restaurant, globe. brand our it's other across brand though quickly weeks the shows of Imagine introduction. UK couple mentioned launched our food, a shows campaign Arches up The Your their ideas just significant ago excitement over McDonald's. with the markets, compelling demonstrating Raise which and only generated campaign our by powerful systems to And has requires as been scale our never nonetheless a ability quickly that, recognizable no instantly XX it customers.

of dollar and customers beloved. Big the McNuggets successful they our environment our closer beyond campaign some our core themselves In brought an of dollar billion and more menu menu Golden Chicken been brand items total, famous most brands items looking of these have the these our our and XXXX, or and Fries, Each world possesses French the to for strength in our products are as such the where Arches platforms love. Throughout or products relevant are core customers never billion McFlurry. ten iconic goes includes brand The McDonald's simple the our Mac familiar, of equities.

Throughout of emerging equities the like juicier, up delivering delicious favorites our step game that We're the Sandwich. to success building our on heritage. more and year, we build continue McCrispy on burgers hotter, the Chicken the

favorites, and classic way McDonald's. our In a of and our are billions of off. as and digital looking are all represented doing love billions beef. ways six When customers we serve quarter, even are These fourth to over customers markets. By top on As get XX% we the enjoy to in our Through chicken system for result, the and we strengthen investments want one loyalty digital, meals. from paying and individuals for more uniquely transforming that both serves their personalized offers, share with brand wide each focus market gaining increasingly same they are sales convenient experiences. our in to customized our of billions customers that this, products, a

markets the more downloads XX the brands combined. and million which Xrd and Xth App McDonald's XX was Xnd, of feeling Through program, than U.S., to turn loyalty we've and increases frequency. expanded our greater over in In total the XXXX, McDonald's, over customers are in visits which times the counting, downloaded connected

we've McDonald's XX wide in position. sales loyalty put in restaurants billion users closed XXX start pandemic, has an The we Since had grown despite Accelerating in almost we system the six year, our $XX markets. active nearly over advantage the As Arches the closing million of the Russia. of success top

part attributable service are in the our to times testament improving, Our strongest been class of in clearly both a satisfaction years, And in to brand our it's is customer and dedication engine. restaurant in best the marketing teams. position

Our fueling even ambitions. greater success is

The our the the feel add success our anything and strategy, a McD's good get few fourth is ago. there questions, D, in weeks ourselves adding Accelerating us growth double lead should of to Arches about been questions Accelerating to two we strategy each of anything the potential our continue growth these pillars, development to and while we we our While could restaurant down the XD's announced is the of which Arches a McD our in Arches? way two the that asking to answers evolve we've to pillar. Accelerating We'll there

comp have strong performance rate historically. has at faster and given a new units than Our us we brand right the to build

in to XXXX. sometime an further it update more effort how announced at our now also the initiatives Chicago organization, we efficient. on Work out build and so the financial accelerating an way modernize to work algorithm. Ian. investor in share details turn faster, all drove of quantify and over underway expand we're Accelerating XXXX, is To further success We long-term that their late Arches the with to in these to you now innovative, more more contribution I'll We'll

our top momentum of our the to of broad strength global Global digits By share center Thanks, across the major line Accelerating for we're customers were our gain Arches, at and putting most comparable and based up brand. the continue fourth Chris. sales quarter, double driving for we markets.

we're operating performance Our environment. despite a strength our direct is it and a clear from business position of of proving again executing our once remains against resilient result strategy, that dynamic macro that the making

and our growth leveraged of core menu operated our XX% digital In markets, delivering the nearly sales highlighted quarter. our channels international we for comp

moments from consistently the five early markets As favorites continued a the UK customers, created Sandwich. feel builds achieving global their of continued recover and across markets. performance to throughout we meaningful our of each Chicken to our category. big This launch Chicken iconic McCrispy good McNuggets delicious operated The drove fourth the strong COVID international these for focus an with chicken on lift like core emerging quarter equity on chicken year,

and elevate track app, the experience. of through holiday the time the pieces return progress The leveraged line We market, UK scan returning with but of into campaign for app our we brought Australia option off momentum also the peel power activations, monopoly McDonald's this market where quarter the learnings sales utilizing and nostalgic on Reindeer from accelerate combine The digital year. digitally fourth brand and to the also Ready UK to leaned our channels. with consecutive Canadian sixth top our helped our which the popular to recent game the

in system, successes McDonald's scale to mobile one like daily It which then over allowing of followed into with digital the us again of It's performance the This that to Fueling McDonald's order digital drive grow the was affordability and featured digital in first Monopoly market, also was examples XX% full this the growth alongside branded Digital messaging promotion helped sales. the engagement. platform total campaign. Germany's strong highlight to of to those power tap launch proven once central market's My market by offers ideas.

leadership France And with continue with fully to share summer In trendy brand campaign McNuggets on as drive with we in market to built promotion of months. our the and always unique in coffee campaign family Australia, leverage integrated in paired messaging our market This strength we iced chicken the coffee continued a our McCafé leadership we highlighting our an upon gains. iconic chicken and maintained sauces. the

added our for to campaigns, marketing price comp which drive enabled testament our to core contributed with collaboration our simplifying Higher to calendar the matters and for our positive performance the with stay business, supported marketing Flea XX% counts, sales are brought of resonated center check along with years, work to strong restaurants. nostalgia focused well and from with created execution customers. strategic Memorable have our a laser has our menus, to restaurant the limited Cactus were Market, truly strengthening Strategic fueling our collective digital together Plant what continuing recommitting last and up in The by complexity teams most growth. our including over Buckets, McRib a this as our guest line franchisees at decisions brand as to put top average with Blue planning marketing, momentum customers has the to on foundation. our to quarter. increases U.S., our Moving over quarter, to several consumers

however, our positive quarter at across comp the to geographies for sales sales China, related focus on dinner helped up strong Japan in an developmental challenging frequency of all were affordability were the as growth markets, a comp resulting limited in restrictions impressive increase the most with Turning in COVID loyal digital consecutive for closures still XXth and in day some quarter, international strength the of part. digital place majority achieved Recovery remain continued our quarter, operations. of sales driving license over fourth customers. segment. with temporary government the XX% A

with negative, over beef restaurants comp launch Best While share in our showcasing gain sales high. the the a is on year, continued operating in were market. Big opened we to despite an traffic Mac China all-time And we last in shrinking which XXX strength new focused QSR ongoing and challenges, Burger

margins continued well Turning elevated costs. pressure were wages, the to over reflecting energy just operated for the as higher commodities, company our quarter, XX% P&L, as from

the with quarter. results for negatively translation of fourth currency share, share $X.XX by per Foreign earnings impacted $X.XX quarter per

nearly across X.X pressures which that the our XX the increase year, of of top XX% business Despite operating reflecting our dollars year, restaurant of now nearly of of nearly significant results line P&L the higher an total contributed generated represent the XX% global model. discussed, restaurants, For margins, over billion billion reflecting was margin currency. our dollars in segments. Franchise we've for full restaurant restaurant portfolio, stability adjusted constant all margin XX%, margin

Lastly, before expenditures to our over it want on I touch Chris, to and profile. hand capital back free briefly I flow cash

to billion, the approximately reinvestment substantially in our CAPEX U.S. efforts spend year for was included X.X experience remaining which Our of the complete future market. the

in the dollars to paying are it's for of off. with free our billions these invested investments our let cash conversion clear flow the business, estate, our me we've and XX% it reinvesting results Chris. that that, over back years, in modernizing few last And year. the After pass was Over in nearly

Ian. Thanks,

to XXXX, will uncertainties headwinds. continue persist we to to face As we ahead expect and look macroeconomic

a Our little to moderate U.S. one on longer mild in from in what earnings be that the recession base our we a and case shared QX is unchanged will for and deeper call. Europe

our detail. on which also expect balance to menus must our in customers. We value with while pressure disciplined need our will environment, to our passing to maintaining maintain on greater our we discuss costs strong pricing our position to through approach inflationary In We continue margins, this Ian pricing.

count judicious demands, far Our so actions. need in positive balancing we with success our performance competing and pricing XXXX guest in these demonstrates to remain

magnitude Ongoing essential. regarding franchisees our will remain and communication with pace pricing the of

again Our franchisees are time and term has that focused on approach and been the rewarded. long

as McDonald's on experience made continue work to perception than understands things the we food. the our of also challenges. can As we price long more customer, is about right always the term value just through up short customer’s for of that the do we provide. It's

our have significant customers think customers how our our this improving experience, a had is on Our also impact modernization efforts of and improving brand.

restaurants. is laser turned we to on Now operations being great and our that are our running fully focused modernized, nearly attention

also focus through our providing experience our Performance as tool, This help every PACE. which way of standards for an for and program, system in restaurant This maintaining most XX assessment new growth reengaged a Excellence excellence is single help deployed in us organizational day. was COVID. restaurants operational this customer we represents markets, renewed protect drivers. suspended will key tools, Customer working and Along during restaurant our brand XXXX, currently our McDonald's consulting teams support new with outstanding known In and market for target field on that of

in PACE dedicated result in to improvements key Restarting consulting of a led performing strong restaurants. to and time lower operational markets coaching several a support as XXXX more

restaurants. customer overall In for same restaurants to satisfaction as improved improved example, scores in the restaurants and For experience by saw XXXX. speed the end had that these be level the customer service, Spain, the drive-thru lowest at of UK the top-performing satisfaction, of

XXXX. outlook. this in program, satisfaction that a month, it also saw largest XX% result experience Additionally, lowest provides Ian clearly which operational turn business about at and to the drives PACE locations XXXX drives detail with expect to in back France customer of customer in as market U.S. in PACE, I'll benefits of scores. This our to increases better more a turn see in performance. improvements, restarted the we similar operational our now talk scores

as in continue talked an As operate quarter, about dynamic just Chris and discussed last to extremely we I environment.

across lower expect our in hampered full margin our this year, will results. on macro-related in labor commodities, our near flow percent to margin inflationary and anticipate pressures percent particularly will weigh our ahead continue This term, Looking we XXXX also business. and than our environment and will slightly utilities, quarter elevated both for four consumers we European to With our company-operated company-operated cash significant be headwinds be is year cost franchisees, markets. impacting restaurant the

ability investing will ultimately mentioned, $XXX support, estimate As keeping aligned $XXX our between provide in of entire gives us XXXX. our growth. temporary million to long-term and drive we've strength an million proactively the on impact scale and targeted to financial efforts these to system previously that We have

over have been contributors past that digital the the technology few G&A, we've growth. our top strong line to made investments to Turning and years

of to on and and Accelerating Moving enable strong an effectively, top reallocating G&A to XXXX, accelerating us we will evolution drive Despite the the and anticipate line particular driven throughout our XXXX, the and more performance. X.X% between future. and harnessing in the Arches, we our In pressures about in efficiently work scale primarily franchise wide of growth organization, forward, expect cost to of be focusing in XX% margin margin by X.X% sales. operating system the growth P&L resources

XX% XX%. compared per due negatively tax will our interest and of in to to be our first average We're we between the the currency rate anticipate year on $X.XX rates And expense this to balances. primarily share and increase translation to quarter. We XX% impact between year for and effective earnings projecting between expect XX% debt higher XXXX $X.XX

a As recently. full slight of have currency now, as year have for a we expect currency fluctuating be seen, you bit translation to the rates been tailwind but quite

the you anticipated to keep to continue results. on our So we'll posted impact

continue plan to be unit about X,XXX open $X.X with more strong XXX plan segments, see openings our restaurants, IDL to half U.S. in year, Globally, new including of billion spend of and be $X.X remaining dedicated about will our The capital billion Transitioning about than across and to we returns. this between new in China, to we openings. we XXX markets. restaurants expenditures, which where IOM X,XXX-or-so will these to

restaurant As partners restaurant a strategic unit additions anticipate these openings. from almost reminder, our provide X,XXX capital XXXX. the net Overall, for about we X% growth in

opened restaurants will XXXX, this expect with sales nearly along X.X% contribute growth. to We in system-wide

share our of strong convert Accelerating in to but about accelerate Chris restaurant the As cash finally, on forward. we pace XX% new flow year, enabling more And to D, we're XXXX, this Arches. details our income underway us unit the more the mentioned, cash of than to fourth opportunity expect openings within later net is have We'll to our development, excited free moving to again once generate work flow.

our forward, the priorities in third, our in our to restaurants; repurchase grow system. and and shares. growing with business and times unchanged: these new continue opportunities existing scale capital that strength McDonald's the first, Going along highlight to to invest units It's to remain allocation of dividend; reinvesting like second,

confident that and deliver Although will business for XXXX long-term and our continue growth will of short-term to our the pressures, our strategy resilience our bring I'm shareholders. system

over back Now let Chris me to to turn it close.

looks, does Accelerating McDonald's level, much Corporation fries." In raise say, soul will lot might there's the our can distinction, on offers McDonald's we true. this business, The fries. the and I discussed sometimes growth to Corporation we throughout imagine, two system burgers see do. like you strategy brand hand a so that I while system, global sell? a global or people, course, see ultimately, and that their As in is trivial sell can at sell as it But exactly and shape, so a us others great Arches a that it more optimistic great-tasting we've of prompts of selling and may Of some in that's McDonald's franchised my our travels a is The food is or ask what and And yet technically our I'm brand a as despite burgers puzzled largely executing call. "Well, business runway we this a brave the high of long headwinds fundamental. as usually sell and McDonald's

As goes system. of and and health goes company the McDonald's the economic value our so brand,

the is our people more relevant to strategy more Arches make Accelerating build Our to to designed more brand McDonald's often.

MCD Our and against the further system-wide the Through Accelerating our we'll system increase more Accelerating more priorities sales, our growth to growth investments and are announced pillars Organization, unlock driving our initiative by recently will biggest enabling faster, help the be even and Organization our sharpen efficient. innovative, us opportunities.

legs to for congratulate their McDonald's success deliver for our employees to and the our our company excited inflation, in to terrific and a record-breaking the XXXX. begin into want of matter to our system the continue I three and continues system and I'll I'm thank Q&A. dedication our pandemic, on global Europe, challenge, war stool, A no McDonald's over the turn it a Mike the business. all execute franchisees, suppliers, XXXX With to and passion that,

[Operator Instructions].

is with Evercore. Our David from Palmer first question

least, like traffic external with been Thank about U.S. and U.S. million and been in It's unit. has sales about some that McDonald's almost even you've we tied how stubbornly added the or your customer fascinating in being see you. than declined, her $X at low. see, rather honest surveys. big-picture it's you the satisfaction his of most A more these in the per years question surprisingly consumers And spending It's as stuff scores stuff the largely were the into to talking

the wondering, you the outcome convenience of decade same-store and where in think customer different or the year doing? the I'm food in do So you your some stuff whether will or over U.S. see you. or traffic satisfaction And on opportunity based U.S., next Thank have do that work, in the a you're speed that's other?

getting calls with that -- over Well, David, we've question. delivery, measure, imprecise very it's about a think we've guest last what also for count we've it's years digital, Chris. what on I Thanks but orders. a seen we're several where and starting with is talked multiple number because with now the seen the imprecise of of

I how And to to so us that has are be changed. complexion important for also experiencing of think while always the recognize it's count, the customers attentive restaurant guest

good that from at year. point, strong on So and about vantage very U.S. things by in our evidenced traffic we from relative performance a that the relative perspective growth that had as this we look we our feel

with question about the larger Ultimately internal your own health customer there different brand, strong. think our we surveys. of lots I and satisfaction surveys have us, are the is for of McDonald's

our improving estate, perception resonating us fact marketing think I is huge seen think, been of in restaurant the communication, modernized have our clearly customer brand has terms you've as that I a in of for we brand. the

And I opportunity. we're offer, an more gives digital the mentioned such the opening forward, good going so the very But to us, the brands to in digital as comments more our that more continue is to there, about and beloved us this experience, unlock And for to our us for opportunity going on tailored to I customers. products delivering the feel be make get that. in

lot progress. on think opportunity. get there So can that's And us, we've made I a if big we a digital, to for be going of

that what as mean outlier, term. are long in imagine in are XX% transactions heard -- you one way, the known start the if it's transactions know digital digital can that you the in in customer. I'll if of those can of QX, opening transactions, we digital comments, XX%, China transactions, I are brand And transactions. to use digital were half think close the known those by just most XX% where of about for As Imagine our number to And imagine the transactions.

So about I'm we're at. where optimistic

question Tarantino Baird. next David Our with from is

franchisee system. I in had morning. good Hi, making question about the a you're the investments

feared? the if necessary for the that you're also $XXX and on think, or line why seeing just mentioned wondering could Ian, you some I be cash signs million I'm seeing as strength not ago, flows line would you the are where on to comment given And franchisees Thanks. that that of you could if top been are versus a maybe million the helpful? maybe part as today was then $XXX as maybe the where bad year. that in franchisee-level cost presumably question, year was in elaborate they top environment were this has it just

it's short-term flows. our Great. Good to one I think And commodity as David, to a margins levels cash headwinds me the inflation and Well, then, pace significant you've think, speak competitive global targeted scale, prices course, heard, we're we the of our the of franchisee of labor. inflation which advantages things of needed. morning course, for think to thanks I that think temporary impact those and, support question. our that for in as and I franchisees, Europe, to we with particularly scale particularly creating and of have brand to, where our our able headwinds due on strong I levels strength is us our to energy provide seeing some we're always, that costs, like that of most course, And and the are of direct mean relatively size, and quite franchisor

maybe obviously, were and cash I XX far. winter gotten hasn't said. still where margins inflation, ago. I to peak on significantly I of because an mean I or as so a Europe. Europe's where warm levels the impact though significant pace bit think, energy and And significant a quite some example had a -- flow, bit it food mean predicting levels think to of I XX I UK scale of I would the of energy inflation, the seen milder of again, mean, just use and months that above even we've is as pressure creating of was

it us size a said, that direct provide and as just us scale, allows in to where our -- to puts needed. position it's most I support, And

world highly we're This the I of warrant. our to new our pandemic. just accelerated important systems on and is to plans a very a the the It's short-term COVID, for think, then strategic out mean system broader seeing. bit honestly, have. was confident, fundamental critically nature more just due of the mean saw focused to support time time now scale that's against of occurs those during around McDonald's. was because system. allowed plans little nothing is our that of and conditions we to significant from it our that you similar when areas if momentum focused it that situation. on remember, stay coming and to provide some did impacts It And all it's is and to aligned, it's we through we our really and opportunity invest I continuing proactively the I

strongest out the this and So we're us I on we to we possible it's momentum the going think that these headwinds, focused help that's get stay in category-leading of position. really have make sure we as --

Gonzalez question with next Eric is from KeyBanc. Our

Maybe I'm unit to number ask thanks uptick slightly a But can be you're to expectations. question. an CAPEX a and basis. about in I sure focus you Hey, can. below guessing X,XXX. growth, on already I development about for gross the XXXX that year, your this finished if then year-end not on one based expecting I'm And openings the was bigger unit it maybe if

that So see guidance? margins new and unit in and permit seeing maybe the with if signaling your terms you perhaps directionally the economics lower you're can Thanks. to on where in those you're improvement costs maybe comment what higher some build-out of and also presumably starting given timing costs, you're construction

yes, Eric, for that. morning thanks Good

in for we're heard net us basis. of in locations, going just talk about on to permits that some you've open sure, X,XXX the a for we think basis think impact had we about getting approved. impacts XXXX, from a gross -- I I just COVID, mean, some on XXXX, coming of on X,XXX out our about as outlook

we're specifically and look about we at you XX% XXXX. planning IOM If the That's up XXX segments, about there. where openings in on U.S. from landed

we've in to I to about development. talked So openings that's have we've that we XD the got sign as confidence opportunity segments and start begin those a that the of think adding accelerating

certainly investments more effective almost making to formats we development opportunity, seeing more our For costs But bring as sure, every on and know we're get efficient we how those like we can think, some effective that in think in inflation up. I I we're and and construction sector across got the we've today. restaurant efficient be some formats of the there's and also

we've And we so about confident got the in good forward. segments, and particularly generate, go feel opportunity add IOM feel continuing that returns to the the our units U.S. we're as really and more in to

just I Yes. a mean the for of think couple a add about I would things. moment. U.S.

XXXX We U.S. haven't eight grew the units in I years. in mean last we the restaurants actually U.S. new year that was the in added

have in program. And had than time, everybody same of I eight we've largely U.S. back our then. we been better a on in would today So think agree, was period a that is it years business where shape focused remodel significantly

And so stack our three-year U.S. you in three-year stack, the our look at XX%. is

three-year global pace, business is haven't haven't IOM. grown up and a in our Our great unit stack to markets, We've done U.S. around is and degree particularly the kept what we with we also the XX%. new owned

and would at we to pace, get XXXX. and of And what where at you of -- sharing right spending that's build, time restaurants, now a what what very on we types so we're look the granular end the with plan the at

question next is with Bernstein from Jeff Barclays. Our

much. very you Thank Great.

everyone as performance. outsized just consumer concern in kind sign the the you the of double-digit U.S. strong any impact menu we macro wondering the a I'm be of any in top pricing markets more of key you slowing is aggressive industry in Clearly color or of or being kind on question great? know versus on on any market would any price, since broadly, just the Europe. consumer maybe looking pushback look Thank color on could line, and more of provide Just perhaps terms McDonald's beneath share you. comp

positioned for in it well to we're on think value. a as value system consumer is world lead resilient, affordability overall, being strengths I seeing of still on terms and market every money. our in the the and plays around We

U.S., a of a bit I calls, prior is per we're to decrease a this. what strong have that probably on so We've seeing consumer, margin bit got Europe we seeing or than a ago trade-down. or say, in six And transaction the We're McDonald's have units But puts of we're are in I months that whether seeing. that it's actually about holding a in expected little would expected up what talked probably the or position. year maybe the is would there these Overall, on ago. little better

I think, to question a I XXXX, inflation. standpoint. going is go to environment the macro continue to there is The be as is So from into continue to think challenging, going be we

it materialize so reach seeing point consumer. maybe in around not you now. depressed out But markets. start many remains sentiment And where do right the does it we're consumer to a Certainly, there

be still menu back seeing And goes it to that think pricing. pace great we just very engaged though, we're And judicious. the making working our about our have line into we're I I through and to on where we're franchisees today historical opening in as what in pricing been the keeping the the flow with said through of customer sure have pricing, coming numbers. we're restaurants our

resistance now. any So right big not seeing

come of consumer-facing consistent. making over I'll metrics. the top said, menu. down probably hook remained though laser-focused a set across because our the competitive the to majority a or gap I we have in we've that those Maybe of just Chris little have that both on those two so I to the across think, XX And on we're markets higher in the position think sure know little we bit months pricing, has those bit affordable back on, even I a for And money value touched and on those mean, as of last we're that choices leadership metrics Chris metrics and got our as

And discipline around pricing talked so money I that in strong sure place. as value good think Chris we've and making for we had keep about, a

key thing markets. to is think I gain other of the to know share that's highlight those we important across we're that continuing all

the on investments think of made We've a And that and the got in experience. day, point of, money over I resonate what fully touched earlier we of another back modernized over the years deliver couple lot mean, at the so experience to how charge. value with think the for I is end kind goes of proof consumers. we've think, last price to a we're I continue about navigating Chris we of I And the estate. it

in upped and think I and strengths to I as on those and a focus that really our coming we invested earn visits execution. We've we choose into restaurants, making sure think I time. them and now. creativity, and we digital time our XXXX of head together every terms that game all are think a And each our one each to experience capabilities marketing, great our consumers. is continue we've into ensure those deliver come of consumers lot in every our interaction with of And

Our from Brian next Harbour Morgan with question Stanley. is

a Yes, you the I'll components there or some some perhaps the example, just some think operating guess of the of outlook result will year is savings that. franchise for would through as on ask think see expect a reallocation, time Accelerating to in thank the for of I'm and this that? the kind the XX% just drivers side, morning. to be Organization that of kind you, Maybe you G&A to the of just of continue that good Do trying about margin leverage margin strategy I over

of sure, margin, we've through. believe for yes, working that pressures you morning that through Obviously, pressures for got of about, the we're thanks term we're we inflationary when operating margins nature. that are from are I pressure Brian, short a question. Well, me working our a Good pieces. that talk on couple specific about think guess, company-operated in couple let the the I mean, there

incremental got support an focused franchisees, so And the an XXXX. we're which impact. providing on that's is to we've impact Obviously,

those year. have to this we'll So of through work both pressures

output growth, organization. of do efficient, in think Any and the how X.X% faster ATO to just the reminder heard innovation G&A opening our working, ATO, focused we're which as is make I we and expect regards an and between year of do we in a more you comments, ways sure we reallocate X.X%. to resource G&A and mean, and as on moving be outcomes for on really kind how I my it's is how against do we get

of for guidance our ATO of are kind XXXX outputs the of in any So G&A. included

continue through that, reflect, I is top to think any four leverage of it's line as we're our strong make on that top drive driving operating and certainly, kind we're strong margin mean kind the we line certainly work to these short-term beginning G&A. believe that's dependent best short-term way momentum, and for as to greater our results forward pressures to And momentum focus like sure XXXX. which get certainly I anything think and we pressures, sales through will that of quarter go

certainly XXXX. so expect beyond think we to And that I see

Silberman Our from is Lauren next Suisse. question Credit with

you very much. Thank

high-income So Thank Can share with average you check lower-income then are across obviously, talk notable about it with seeing comps. strong consumer? the U.S. as And you. consumer just very what traffic and gains, relates saw and specifically there's in there? the if anything dayparts, the versus performance you quarter you what to

Yes.

the standpoint I think the growth what So focusing a very U.S., just was from across dayparts. balanced on performance saw we

that around But that's the very of hours the opportunity some particularly Late be So kind environment. been of core we've due there. operating night noteworthy around because to just to changes continues dayparts, for staffing made nothing strong. our us

growth gaining gained presence that also if And you bit to despite on a of a We're of We've beef, share think quite we're grow on continuing in strong core on our menu, share chicken, about in on year. chicken our seeing also strong share about very point share particularly the been having in a then beef already. where we've last chicken.

growth outsized U.S. with are and Digital balanced growth. nice delivery, the course, So of driving

U.S., in XX% XX% in growth that obviously the rather, XX%, at above transactions, we is digital saw you So look the digital, or which if -- up close QX. the to

And I'd is in of thing seeing of there noteworthy that then only probably we're visits. transaction uptick per the say is consumer units an slightly, the bit while down is on low-income the a frequency maybe little

around spending where think an improvement but I so frequency seeing about that And customer a how much to absolute more ordering. little a we're probably of bit an in, the They're consumer. that's something low-income dollar cautious is amount, little with being bit maybe they're coming

of to Maybe the of talked more about of that. channels to just a And offsets bit pieces we I the average full partial little on order of I'll U.S., if about standpoint. think were to XX% I Chris we at texture. of One pre-COVID behavior. pricing hook earlier, of an a is as in of a reversion continue this kind couple additional the couple kind from year you look mean, kind see up

back is typical channels. a little course, come while of to of customer’s delivery more as kind So it's elevated, ordering bit still revert

Chris of as that got you've also more then kind value-conscious -- choice maybe making are And that touched that on, discerning consumers making.

we've proof that forward. circumstances really second fact the strong ensure And we share. I and for is that in are comp on are I despite to position think in are gain the money we think go points are a those as position accessible mean thing for leadership business. we that U.S. that consumers we're to continue already both the And value things and of positioned know two individual fact our a basis, talked well that think affordable I I we we're and which we to, a strong important. in affordability, the really their

Next question UBS. Geiger with is from Dennis

that you. in that Thank that all really as biggest talk could Chris, more opportunities about spoken rank bit order you. the perhaps a same relates beyond? call? the how I the continuing but Thank the the to see U.S. years, as in count just recent about momentum it's you on you'd think of and following guest kind XXXX if don't you it or momentum XXXX of in drive and in curious you've the opportunities markets, some to know global to key

and have pillars our the strategy. just now we really to menu that in back XDs. goes It the marketing for It's Yes.

can each we're a and has of by at as what and But around going lot I encouraged will there's and quite our the could excellence. world Accelerating good of runway And through to still on continue be doing be better growth. think shifting we're so doing to great that we the ideas I'm this Organization get still brand more to that marketing strengthen brand and those from standpoint. effort. around a as of we bit we're lifting a not

is coffee. opportunity us menu, for On chicken core a is big as

think XDs, individual maybe I growth. that was we're we're developed. specific to course. burgers, chart in And good And something very growth chicken in very past going left then to more of be some But products and markets I bit on opportunity. having on on to us, a that the to coffee, that us well offer all kind think, for think the with a of have opposed focused be little as those I particular, their

time. is opening, to very and the satisfaction PACE restarting, PACE we're So Arches. a I've been the my what comments encouraged service side. playbook. And we're the with seeing put mentioned Accelerating I in on has in, customer the into what different as It's about very than much same been improvement in when this adding around see operational the driving talking that it's playbook With not U.S. how we're year, we

restaurant, or confidence So the me of in operations that that you on gives the execution take overlay of at improved MCDs initiatives and all line-driving outlook. the and you the improved top related top to

question from Senatore of Sarah is with Bank America. next Our

is since the to -- I just Thank unit sort say, to wanted this growth mentioned, U.S. maybe in initiatives these of ask in which you about some that when of it's you of XXXX context since had history, been Chris, -- you. -- McDonald's the

picked I As up but slowed. unit a had growth then, before recall, few years sales same-store

-- trade-off so a there has like it seems And maybe there's historically, there.

renewed time? really Thank about the I the this of piece could lines around joined, so there what of then might reducing feels you're if versus guess, that, doing maybe headquarters. you do where related, and So how compare And you now management the that when I think some making you. balance? reinvestments and to wanted you perhaps to the layers the or the you were to I and time sort initiative, clear one communication be initiative Chris, markets happened streamlining was just that it like and ask last was between a think, and an then what's since of it's about that where

Sure.

one to units want have you your gum. in first be I It's unit growth recipe putting growing It's when you've think to chew when point unit is underlying and not in comp difference someone comp the combination. underlying without of business. the got growth And I health a see growth, is of on or strong sales our because reflects think very historically big them that's been the walk versus out good not two the around because other. the number strong a there I'm always leery that we industry. when sales I comp strong

comp And in so for us, strong results, seen I think we've our sales. got, as you've

good about very outlook. feel I the

units so I we just maybe we at of permission the some in looking unit we do looking how And and put number that smart think looking and and to where growth. putting that. about that an gives at quality to the site. top not sometimes at now to me very the were past, absolute on of But And need be

roll number, to so out pacing, do time this to to the that we've continue to exact both that the as sure the so why when make we about got that's And as site we some sales take confident well of year feel the the that ability we quality unit growth. drive want comp

some there's about question the organization, differences. maybe your with similarities then And

XXXX mean restaurants. was our was or refranchising big if I in about think of done it that savings that through what I -- chunk you was go came I largely a back to think thereabouts,

is happened was But that the benefits side, this in some standpoint. And in ways about at when level. business in And decentralized is would delayering model much And wheel the what get we faster, working. we terms not we reinvent that senior role of a more what just what I've that seen and ways very I've the opportunities say, more of more approaches my have kind too of, That that of way effort the was because are have I -- as I often. was innovative, a us as in seen historically gave to that of some were been was McOpCo of to it's down changes lot efficient. where G&A from in we franchise what that in some areas U.S. that moved time There percentage working. more and took also opposed job -- so we to

we've an happen is that would And seen you example. I we haven't global other there's just been proliferation our market around and the thing as level. at sharp give priorities been so I the think priorities that of sometimes

priorities. and we all example, one priorities. sorts priorities, XXX can't that you this interesting course, for XXX Well, through about can't the and has opportunities, resource uncovering As learning ATO have like, exercise of we're market of have going XXX you things, where we're

all these better. And so making be as us to things, we discover and this is about learn going

changing flow the I that through, give as that of ways change of top versus that more our senior G&A model was make I to the fundamental both better maybe a today level. So to going related about think some with of I difference efficiencies working to Ian at ultimately think back also are the think was This is with franchising are line, structural we leverage. going on us much talking us but delayering what about in more did much XXXX,

Our Tower from is next Citi. question with Jon

Great, thanks question. the for taking

start globe talk in the thoughts across quite with us a your Thank it's you. about U.S., globe some the to that? regarding through give been the in quite particularly XXXX. pricing strength for the has if I know into Curious cost bit year. to across if over strong carried you're business stuff that fourth expectations can inflation the quarter the data, Curious know indication quarter? your you the could that spoken of on if the we've first the how year Just address saw and of And the industry you inflation then about in the the curious, like working an quarter-to-date franchisees some and full second, versus McDonald's running to

Europe. from about focus U.S. of mean, a to on in IOM of food start little about kind that Good the inflation slope. and bit say mid-teens we and let inflation, pieces. texture bit paper that in Jon, I'll give the peak we're I then certainly, but And and couple past XXXX I start a talk I'll downward a answer, But had talk on one. to me morning a U.S., maybe just in of with heading with a the would think we perspective. maybe my high it on

I digits. think mid of going think high in inflation to to food our kind we is be XXXX, and single paper

still for from very it's elevated So been long where obviously time. a

that that, got And rates that also so with and combination impacting energy like are prices you've up in and interest us. are that, things

we're with still working -- think I will period think mid-XXXX. focus ease of inflation I we will I think if peak a start move inflation. Europe Europe, to you through to don't until think probably the in we on IOM

we'll XXXX see some fact, markets higher inflation XXXX. with we of in levels saw In in in than Europe

XXXX. and in IOM mid-teens, lower on substantially what say, would than I XXXX, an food to for so probably inflation expect kind we saw in paper And basis be not that of we

level indication inflationary you an gives that the the of pressure. think So I of

they resolved course, was in Europe a are the haven't energy Of levels underlying energy they or in yet, up mean talking prices tensions XX far, certainly where hit because while earlier Europe, fully as I the ago. aren't winter about prices maybe had and I we've so inflation peak, and significantly warmer so were months

disciplined so we're perspective, think thinking. consumer-led in very and very be from to be what is I our pricing And do a trying

advisers have couple provide the the that the tools, and to our third over quarter years heard made data, last we've investments call the business. just really to bit to about the little me in may You of the talk a improve use the analytics recommendations

franchisees Chris we're course, Of think the that own taking. disciplined our around decisions. always, pricing we're we about, I being feel very as But as talked their make good pricing

our to and mindset, pressures long-term we of knowing to we because system go want do momentum recover margins when to that have to a affordability momentum of is then, drive at and continue we that course, these out scores, pressures maintain good look the line what really on using of we and our that And and continue kind so leadership as top We're begin gain strong through has think job a those positions. money for value we that done we forward. leverage

momentum leverage the will that start And so XXXX seeing we're good we going position kind of time continue feel a the think pressures really is in moment in but peaks of really kind those to get keep drive out XXXX of we're as gaining I where again. to that a strong us of to

Ian into our would I the business one Yes. feel Europe, about seen touched the favorable I on reports keep performing. Omicron, thing, there's add, I got good in and the some just weather, mean, in is XXXX, how tailwind. mind, we've We've of weather think just good heading just I've on momentum got in we But but not that's industry a U.S.

off momentum that there we good are feel So I industry-wide, some with. very are think, starting there things year we're helping, about but the the

with is Andrew Cowen. Our question next from Charles

Germany, quarter. Great, Chris, really But the as performers. IOM, and France, concerns out UK, last XQ you the within macro same Europe strong standout you thanks. expressed comps, in called

up if the income to anticipate spread from statement the the could dining business about sharpen benefiting franchise XXXX and about But how year trade-down in million be And I $XXX focus Thanks. the be the if in XXXX housekeeping profitability spoke throughout few greatest seeing you degree to back so to operating is you or recognizing will how highlights. $XXX Europe And one value on a quick that positioning front or country-specific would Europe talk you of while release million is challenge? in the higher-priced evenly and in you're can show half-weighted squeeze half helpful? that the just franchisee from question,

to the about broader Ian I'll have housekeeping I cover item, question your don't then the and Europe and Why consumer. get

Yes, hi Andrew.

on support just million is the $XXX to directed million, to $XXX obviously franchisees. So that

franchisee in the our revenue statement it back work that. as Chris the I'll through up show give would rest. it to so income And for through we

that, to in Yes. and seeing in we're growth about benefits question the And the IOM good and markets. of our balanced Europe trade-down

we degree see well say consumer some the segments. of kind across So sort visibility different disproportionately that the have of that of to I sort the trade-down benefiting consumer, up wouldn't all from strata we're we to at that are continuing hold of

last I time Morgan. John one have from Ivankoe for J.P. with question

needs so at $X.X on overall Thank for that of but Hi. includes The on you new billion capital fiscal CAPEX in the Certainly, U.S. that appreciate question. is guide to just for question business. much the $X.X and XXXX units XXX units. billion, IOM

of -- guess, the XXX kind So number I different there's in guess, markets about specifically, you of the first of parts in I getting to you expect is and these and part? for this. necessarily year will think I existing of of right a developed that U.S., that in number earnings, unit I going net earnings I there's to later completion meeting? that forward, your in a think ratio Secondly, been increase, of hit could mean going basis the Do forward guess annual project, kind you what of I Thanks. up for maybe number the release, a analyst a couple an that I'm think thing IOM on this about take or cash in CAPEX? EOTF bit may at And McDonald's' finally, really this another of the suppose that little has to mention mean, if the you conversion. XX% important is XXXX right the mean largely did I large preview your you markets, wondering talk

for good John, that. Yeah, all thanks morning

resonate good well XXX investing in is the years more that year. I brand a I say think said, we've couple we'll really later But build the think the have as brand, to I done consumers. for what the in by openings, job to on doing last in on the think of over demand So with Chris

opportunity And so ahead. certainly feel there's

in standpoint, talk year. later as about a more we'll that, think I from I quantification the said,

dealt coming we've to shifts restaurants. more was there behavior opportunity and $X.X a billion the certainly about billion kind we got with growth. through us CAPEX, $X.X of an say of unit deal work to of in understood ordering XXXX, for things of lot to one we half is the consumer new COVID going go into -- would I obviously, On channels that towards as was

of certainly with in that's and and created and customers volume managing created, -- has we're challenges restaurants think dealing with demand that in just markets. of some we've I owned our the capacity the some volume our the across

to new some having and set CAPEX reinvestment that continue up so And that they're to the of just enabling working deal our going kind just to volume to volume forward. grow with through be channels better us of these like ordering that delivery is make digital and restaurants go business capacity by we available as handling can they of sure and to more

of capital And that there. so going some is

that that good something will terms converting in that's in flow. talked in the think feel our on you free feel income I of [ph] be as place forward, think we cash to should we've XX%, XX I net about going

you, Thanks, Have joining. Thanks for a Chris. Ian. day. everyone great Thank

concludes Corporation call. This McDonald's investor

You may now disconnect. a day. Have great