McDonald's Posts Strong Q4 Sales in US, But COVID Drags Elsewhere

US same-store sales had solid improvement, but global sales were down.

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McDonald's is back on track in the U.S. and other key markets but still seeing a sales drag from coronavirus restrictions in other parts of the world.

U.S. same-store sales jumped 5.5% in the October-December period, pumped up by new menu items like spicy Chicken McNuggets and a meal deal collaboration with Colombian singer J Balvin. For the full year, McDonald's said U.S. same-store sales — or sales at stores open at least a year — were up less than 1%, their sixth consecutive year of growth.

But worldwide, same-store sales were down 1.3% for the quarter, reflecting store closures and limited operating hours in various markets across Europe, Latin America and Asia. For the full year, global same-store sales were down 7.7%, a bigger decline than the 7% drop Wall Street had forecast, according to analysts polled by FactSet.

McDonald's President and CEO Chris Kempczinski said 2020 was the most difficult year in the company's history.

“While a new year brings new hope, the issues and uncertainty that emerged last year persist,” Kempczinski said Thursday on a conference call with analysts.

McDonald's is doing better than many competitors. Earlier this week, Starbucks said its global same-store sales fell 5% in the October-December period.

Drive-thru windows — available at nearly all U.S. stores and two-thirds of stores in its biggest European markets — kept customers coming despite lockdowns. McDonald's also benefited from a push into delivery made before the pandemic began. The company said nearly 30,000 stores worldwide now offer delivery, and the U.S., Australia and Canada doubled their percent of delivery orders last year.

But it was more costly to operate in the pandemic. Over the last year, the company has deferred rent and royalties for franchisees and obtained hundreds of millions of masks for employees.

McDonald’s said marketing spending was higher than usual in the fourth quarter because of the launch of a new ad campaign, and it has given local franchisees $200 million more than initially planned this year to help their marketing efforts. The company also said it faced higher-than-expected costs to close underperforming restaurants, including around 200 in the U.S.

The fast food giant fell short of Wall Street's earnings and sales expectations for the fourth quarter. Revenue fell 2% to $5.3 billion, below analysts' forecast of $5.4 billion, according to FactSet.

Net income fell 12% to $1.4 billion. Adjusted for one-time items, the Chicago fast food giant earned $1.70 per share in the fourth quarter, short of Wall Street’s expectation of $1.77.

McDonald's Corp. shares were flat at $208.28 in morning trading.

Kempczinski said U.S. sales this month have been elevated, likely because of a new round of government stimulus checks. International sales are still down, and will be until dining rooms reopen, he said.

But he said Australia, where sales have largely recovered, gives a good idea of post-pandemic demand. Mobile ordering, delivery and takeout remain elevated there, he said, and customers ordering through those channels tend to spend more per order.

McDonald's will also continue to juice demand with new offerings. Next month, it introduces a long-awaited chicken sandwich in the U.S., its answer to hit products from Popeyes and Chick-fil-A.

The company also plans to roll out a new loyalty app, MyMcDonald's, in six markets by the end of this year. It's designed to make it easier to order and entice members with targeted dining offers.