McDonald’s reveals expansion plans
The company reported a fourth-quarter profit of $1.38bn in 2011, up 11% on the same period last year. Revenue rose 10% to $6.8bn, while comparable sales grew 7.5% globally, the highest quarter in seven years. This was driven by a 7.1% increase in the US, a 7.3% increase in Europe and a 6.9% increase in the Asia/Pacific, Middle East and Africa region (APMEA).
Over the whole year, global comparable sales increased by 5.6% , while US sales increased by 4.8% – the best performance in the country since 2006. Europe also performed well, driven in particular by growth in France, the UK, Russia and Germany. The company put the growth down to emphasis on fourth-tier menu development and its “re-imaging” of restaurants in the region.
McDonald’s chief executive officer Jim Skinner said the results proved the company had “fortified” its leadership position in the global fast food market. Revealing its plans for the future, he said that in addition to extending its menu, the chain would invest $2.9bn of capital, half of which would be dedicated to opening new restaurants and half of which would be invested in its current restaurant portfolio. “Our first priority remains reinvesting in our business,” he said.
McDonald’s CFO Peter Benson revealed to shareholders that the new restaurants will include 175 in the US, 250 in Europe and 750 in APMEA, including 225 to 250 new restaurants in China. Spend on existing restaurants will include the reimaging of at least 2,400 restaurants - with 800 in the US, 900 in Europe and 475 APMEA. “Re-imaging is a key component of modernising the customer experience, as it provides a strong foundation for future growth and further brand differentiation,” said Benson.
In terms of menu development in 2012, Skinner said McDonald’s will roll out Chicken McBites in the US, while focusing on fourth-tier premium offerings in Europe, including the re-introduction of the Chicken Mythic sandwich in France and the Chicken Legend sandwich in the UK. In the Asia/Pacific region, he said the company would maintain its focus on innovative chicken offerings, along with locally relevant products, such as chicken and beef sandwiches with bacon, lettuce and tomato in Australia and Big America burgers in Japan.
McDonald’s has now achieved nearly nine years of positive growth and serves 68m customers across the world every day. Benson admitted that the company’s ability to grow its profits, despite signficant cost pressure and economic volatility, was in part due to menu price increases. He added that McDonald’s would continue this strategy in 2012. “Menu pricing has a significant impact on margins, and our philosophy remains intact as we start 2012. Where warranted, we will strategically take increases to offset some, but not all, of our higher costs,” he said.
