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    MCD
    Earnings call· Jun 2025(Q2 FY25)

    MCDONALDS Q2 FY25 earnings call MCD

    Aug 6, 2025 Source

    Executive summary

    McDonald's Q2 FY25 — Global Comps Up, U.S. Value Focus Amid Low-Income Consumer Headwinds

    McDonald's navigated a bifurcated consumer landscape in Q2 FY25, leveraging its value platforms and menu innovation to drive global comparable sales and guest counts. While international markets demonstrated strong execution with value offerings and marketing, the U.S. faces headwinds from low-income consumer pressure and core menu pricing challenges, prompting a collaborative effort with franchisees to strengthen its value leadership. The company continues to advance its Accelerating the Arches strategy through digital transformation and new restaurant development.

    Highlights

    4

    • Global system-wide sales grew over 6% in constant currency, with global comparable sales up nearly 4%.

    • Internationally Operated Markets (IOM) and International Developmental Licensed (IDL) segments delivered strong comp sales growth of 4% and over 5.5% respectively.

    • Adjusted EPS increased by approximately 5% in constant currencies to $3.19.

    • The company reached over 185 million 90-day active loyalty users, progressing towards its 2027 target of 250 million.

    Concerns

    4

    • U.S. QSR traffic remained challenging, with low-income consumer visits declining by double digits year-over-year.

    • Core menu pricing in the U.S. is negatively impacting value perceptions, with combo meals often priced over $10.

    • Cost pressures, particularly beef prices up 20% in Europe, are becoming more challenging in international markets.

    • The breakfast daypart is noted as the weakest due to economic stress on consumers.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year adjusted operating margin
    mid- to high 40% range
    high materiality
    High
    Full-year company-operated restaurant margin
    around 14.8%
    medium materiality
    Medium
    Full-year G&A as a percentage of system-wide sales
    about 2.2%
    medium materiality
    High
    Full-year interest expense increase
    about 4%
    low materiality
    High
    Full-year effective tax rate
    20% to 22%
    low materiality
    High
    FX translation impact on adjusted EPS
    about $0.15 tailwind
    medium materiality
    Medium
    Global new restaurant openings
    approximately 2,200
    high materiality
    High
    New restaurant openings in IDL markets
    more than 1,600
    medium materiality
    High
    Net unit growth
    slightly over 4%
    high materiality
    High
    Global chicken market share growth
    100 basis points
    high materiality
    High
    Best Burger implementation
    in nearly all markets
    medium materiality
    High
    90-day active loyalty users
    250 million
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Global
    System-wide sales growth in constant currency, with positive comparable guest counts despite a challenging industry backdrop.
    Comparable sales growth: nearly 4%Comparable guest counts: positive
    		—over 6%——
    Internationally Operated Markets (IOM)
    All markets driving positive comp sales growth, supported by EDAP menus and compelling meal bundles.
    Comp sales growth: 4%
    		—4%——
    International Developmental Licensed Markets (IDL)
    Led by Japan, with positive comps across all geographies.
    Comp sales growth: more than 5.5%
    		—more than 5.5%——
    U.S.
    Outperformed near competitors despite challenging QSR traffic and double-digit declines in low-income consumer visits.
    Comp sales growth: 2.5%Outperformed near competitors on comp sales and comp guest counts
    		—2.5%——

    Operational metrics

    19
    Adjusted EPS
    $3.19up about 5% versus prior year quarter in constant currencies
    Q2 FY25

    Financial results largely in line with expectations.

    Adjusted operating margin
    nearly 47%
    H1 FY25

    Highlighting the durability of the business model.

    Restaurant margin
    $4Bincrease of about 5% in constant currency
    Q2 FY25

    Driven primarily by franchise margin performance.

    90-day active loyalty users
    185M
    Q2 FY25

    Progressing towards a goal of 250 million by end of 2027.

    Loyalty user frequency
    26 timesup from 10.5 times/year before joining
    annual

    Frequency of visits for loyalty members after joining the program.

    Ready on arrival wait time reduction
    more than 50%
    current

    Geofencing technology lets restaurants know when to start orders, reducing wait times for food pickup.

    Best Burger implementation
    more than 80
    current

    Expected to be in nearly all markets by the end of 2026.

    Chicken market share
    increased
    Q2 FY25

    On track to grow global chicken share by 100 basis points by end of 2026.

    Beef prices
    up 20%
    current

    Primarily due to a supply issue, contributing to inflation.

    Pricing taken
    low single digits
    current

    Franchisees being disciplined despite high inflation on inputs and labor.

    $5 Meal Deal anniversary
    1-year
    current

    Continues to resonate with consumers and perform very well.

    Buy One, Add One for $1 deal launch
    launched
    beginning of this year

    Part of the McValue platform, complementary to the $5 Meal Deal.

    Snack Wraps national price point
    $2.99
    current

    Franchisees voted to extend this advertising through the end of the year.

    McValue meal offerings
    3
    current

    Includes the Daily Double, providing more entry-level meal options.

    Low-income consumer visits
    double digitsdeclined versus prior year period
    Q2 FY25

    Low-income consumers typically visit restaurants more frequently, re-engaging them is critical.

    Middle-income consumer visits
    marginally positive
    Q2 FY25

    Slightly better than Q1.

    High-income consumer visits
    grow visits positively and consistently
    Q2 FY25

    Continuing to grow visits positively.

    Loyalty program penetration
    roughly 1/4
    current

    Not yet large enough to fully offset declines in low-income consumer visits.

    Loyalty program penetration
    90%
    current

    Example of a market with high loyalty penetration and significant benefits.

    Industry KPIs

    3
    MetricValueDetails
    Comparable sales compsnearly 4%%
    Global system wide salesover 6%%
    Net unit growth development pipelineapproximately 2,200restaurants

    Product announcements

    6
    ProductTypeDetails
    Snack Wrapslaunch
    Beverage lineup testexpansion
    Big Archlaunch
    McCrispy Stripslaunch
    Daily Doublelaunch
    McWingslaunch

    Deals & partnerships

    3
    A Minecraft MovieGlobal marketing campaign

    Largest global campaign ever with participation by more than 100 markets, driving strong consumer response.

    Snapchat+Loyalty rewards extension

    Partnership in the U.S. allowing customers to extend rewards to new experiences like the Snapchat+ subscription with premium features.

    GoogleTechnology development (edge computing)

    Developing edge computing, which extends the cloud to restaurants and serves as the digital foundation for next-generation innovation, powering AI and IoT-enabled restaurants.

    Risks & headwinds

    6
    Challenging industry backdropQ2 FY25

    Global comparable sales growth of nearly 4% despite challenging backdrop.

    Mitigation: Power of McDonald's value and affordability platforms, exciting marketing and menu offerings, and world-class execution.

    U.S. QSR traffic challenges from low-income consumersQ2 FY25

    Visits across the industry by low-income consumers declined by double digits versus the prior year period.

    Mitigation: Remaining agile with value offerings to strengthen leadership in value and affordability; working with franchisees on core menu pricing; McValue platform, $5 Meal Deal, Snack Wraps.

    Negative value perceptions from U.S. core menu pricingCurrent

    Combo meals could be priced over $10, shaping value perceptions in a negative way.

    Mitigation: Working closely and collaboratively with U.S. franchisees to address core menu offerings and pricing.

    Continued high inflation and cost pressures in international marketsQ2 FY25 and ongoing

    Beef prices up by 20% in Europe; high single-digit inflation in most European markets.

    Mitigation: IOM markets being prudent about pricing actions (low single digits); disciplined execution of value and affordability platforms.

    Challenging macroeconomic environment in ChinaQ2 FY25 and near-term

    Gained market share in chicken and overall QSR despite headwinds.

    Mitigation: Confidence in long-term potential of China market; on track to deliver new restaurant opening target there this year.

    Weakness in the breakfast daypartCurrent

    Breakfast daypart is the most economically sensitive and weakest daypart in the day.

    Mitigation: U.S. started advertising breakfast nationally; conversations around additional breakfast value programs; work underway to restimulate growth.

    What to watch in Q3 FY25

    5

    U.S. Core Menu Pricing Strategy

    Next quarter / Remainder of the year
    CurrentCombo meals could be priced over $10, negatively shaping value perceptions.
    TargetImproved value perception and leadership.

    Why it matters

    Addressing core menu pricing is crucial for re-engaging low-income consumers and strengthening U.S. value leadership.

    Today, too often, if you're that consumer, you're driving up to the restaurant and you're seeing combo meals could be priced over $10, and that absolutely is shaping value perceptions and is shaping value perceptions in a negative way. So we've got to get that fixed.

    Q&A highlights

    7

    How do McDonald's value and affordability scores stand in the U.S. today, especially after recent menu changes, compared to the past and competitors? Is there a difference versus IOM markets?

    Value perception is strong among loyalty members and McValue users, driving significant frequency. However, core menu pricing (combo meals over $10) negatively impacts value for other consumers. IOM markets are in a better position due to strong EDAP programs and less competitive pressure.

    “Today, too often, if you're that consumer, you're driving up to the restaurant and you're seeing combo meals could be priced over $10, and that absolutely is shaping value perceptions and is shaping value perceptions in a negative way. So we've got to get that fixed.”

    asked by David Palmer · answered by Christopher Kempczinski

    3 min read6 chapters

    Detailed Narrative

    01

    Global Performance and Consumer Dynamics

    McDonald's delivered robust global system-wide sales growth of over 6% and comparable sales growth of nearly 4% in constant currency, driven by positive comparable guest counts. However, the U.S. market experienced a challenging QSR traffic environment, with low-income consumer visits declining by double digits, leading to a cautious outlook on the near-term health of the U.S. consumer. The middle-income consumer showed marginal improvement, while high-income consumer visits continued to grow.

    02

    Value and Affordability Strategy

    The company emphasized the importance of its value and affordability platforms, with Internationally Operated Markets (IOM) successfully implementing Everyday Affordable Price (EDAP) menus and meal bundles, leading to improved value perceptions. In the U.S., the $5 Meal Deal and Buy One, Add One for $1 deal continue to resonate, and the re-launch of Snack Wraps at a $2.99 price point has shown encouraging early results. Management is actively collaborating with U.S. franchisees to address core menu pricing, which is seen as a key driver of consumer value perception.

    03

    International Market Strength

    IOM and International Developmental Licensed (IDL) markets demonstrated strong performance, with comp sales increasing by 4% and over 5.5% respectively, with all markets driving positive growth. This success is attributed to strong execution across value, menu innovation (e.g., Chicken Big Mac in Germany, Big Arch in France/U.K., Hot Honey Chicken/McWings in Australia), and marketing campaigns like the global Minecraft Movie partnership. Despite significant inflation, particularly a 20% increase in European beef prices, franchisees have maintained disciplined pricing.

    04

    Technology and Digital Transformation

    McDonald's is advancing its "Accelerating the Arches" strategy through digital initiatives across three platforms. The consumer platform has reached over 185 million 90-day active loyalty users, with loyalty members showing significantly increased frequency (10.5 to 26 visits annually). The restaurant platform is deploying edge computing and "Ready on Arrival" technology, reducing wait times by over 50%. The company platform is modernizing finance and HR systems, with a global business center in India and Mexico, aiming for long-term efficiency and cost savings in G&A.

    05

    Menu Innovation and Category Focus

    The company is unlocking growth in key menu categories: beef, chicken, and beverages. The "Best Burger" initiative is being implemented across over 80 markets globally. In chicken, McDonald's increased market share across its top 10 markets in Q2 and remains on track to grow global chicken share by 100 basis points by the end of 2026. An expanded beverage lineup, including cold coffee and refreshers, is being tested in approximately 500 U.S. restaurants, building on learnings from CosMc's.

    06

    Development and Financial Outlook

    McDonald's remains on track to open approximately 2,200 restaurants globally in FY25, with about 1,800 net additions, resulting in slightly over 4% unit growth. This includes around 1,000 new restaurants in China. The company reaffirmed its full-year adjusted operating margin target in the mid- to high 40% range and G&A as a percentage of system-wide sales at about 2.2%. However, the target for company-operated restaurant margin was adjusted to be around 14.8%, consistent with 2024, rather than a slight increase.

    AI-generated summary of the company’s earnings call. Not investment advice.