McDonald’s Corporation (NYSE:MCD) Q4 2022 Earnings Call Transcript

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And so another kind of proof point of, I think, how we’re navigating and continue to resonate with consumers. I mean, I think at the end of the day, value for money is about the experience we deliver over the price we charge. And I think it goes back to what Chris touched on earlier that we’ve made a lot of investments over the last couple of years in the experience. We’ve got a fully modernized estate. I think we’ve upped our game in terms of our marketing, creativity, and execution. We’ve invested a lot in our digital capabilities and interaction with consumers. And I think all of those strengths are coming together now. And I think our focus as we head into 2023 is really on making sure that each and every time consumers choose to come into one of our restaurants, we deliver them a great experience and continue to ensure that we earn those visits each and every time.

Mike Cieplak: Our next question is from Brian Harbour with Morgan Stanley.

Brian Harbour: Yes, thank you, good morning. Maybe I’ll just ask about the kind of 45% operating margin outlook for the year and the components of that. Do you think that as a result of kind of the Accelerating the Organization strategy that there will be some savings in G&A over time or is this just perhaps a reallocation, would you expect to continue to see some leverage on the franchise margin side, for example, I guess I’m just trying to think through some of the drivers of that?

Ian F. Borden: Good morning Brian, yes, thanks for the question. Well, let me talk about, I guess, a couple of the pieces. I mean, when you think about operating margin, for sure, there are a couple of specific pressures that we’re working through that we believe are short term in nature. Obviously, we’ve got that pressure on our company-operated margins from the inflationary pressures that we’re working through. And so that’s an impact. Obviously, we’ve got the incremental support we’re providing to franchisees, which is an impact focused on 2023. So we’ll have both of those pressures to work through this year. I think in regards to G&A and ATO, I mean, as you heard in my opening comments, we expect G&A for the year to be between 2.2% and 2.3%.

Any kind of outcomes and just a reminder on ATO is it’s really focused on our ways of working, which the output is how do we get more efficient, how do we reallocate resource against innovation and growth, and how do we make sure we’re moving faster as an organization. So any of the outputs of ATO are kind of included in our 2023 guidance for G&A. I think certainly, the best way to work through any kind of short-term pressures is to continue to make sure we’re driving strong top line momentum, which I think our quarter four results reflect, and it’s certainly our focus for 2023. And as we get through these short-term pressures, certainly believe that, that strong top line momentum will mean that we’re beginning to drive greater leverage and operating margin and anything that’s kind of dependent on sales as we go forward like G&A.

And so I think we certainly expect to see that beyond 2023.

Mike Cieplak: Our next question is from Lauren Silberman with Credit Suisse.

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

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