McDonald's (MCD) Tops Q2 EPS by 2c; Global Comps Down 0.7%

McDonald's (NYSE: MCD) reported Q2 EPS of $1.26, $0.02 better than the analyst estimate of $1.24. Revenue for the quarter came in at $6.5 billion versus the consensus estimate of $6.45 billion. Global comparable sales decrease of 0.7%, reflecting negative guest traffic in all major segments.

"We have made meaningful progress since announcing the initial steps of McDonald's turnaround plan in early May," said McDonald's President and Chief Executive Officer Steve Easterbrook. "To position the business for long-term growth, we've undergone significant organizational change and are streamlining our global resources to improve our efficiency and effectiveness. While our second quarter results were disappointing, we are seeing early signs of momentum. Looking ahead to third quarter, we expect positive global comparable sales led by growth in our newly-created International Lead Market segment and China's continuing recovery from the 2014 APMEA supplier issue. I am confident that we will create the transformation necessary for McDonald's to become a modern, progressive burger company delivering a contemporary restaurant experience."

In the U.S., second quarter comparable sales decreased 2.0%, reflecting negative guest traffic as the featured products and promotions did not achieve expected consumer response amid ongoing competitive activity. Operating income for the quarter decreased 6%, reflecting the soft, top-line performance. Going forward, local market tests around all-day breakfast and menu simplification will continue as part of the work underway to enhance the experience for over 25 million U.S. customers who visit McDonald's each day.

Europe's second quarter comparable sales increased 1.2% driven by solid performance in the U.K. and Germany, partly offset by negative results in France. Second quarter operating income decreased 20% (2% in constant currencies) reflecting economic challenges in certain key markets and strategic charges associated with the global business turnaround plan.

In APMEA, second quarter comparable sales decreased 4.5%, and operating income declined 26% (16% in constant currencies) primarily due to the impact of prolonged, broad-based consumer perception issues in Japan along with negative performance in China and other Asian markets, partly offset by strong performance in Australia.

Kevin Ozan, McDonald's Chief Financial Officer, noted, "Our turnaround will be led by operational growth and supported by a comprehensive approach to financial management. The structural changes we are implementing, coupled with our plan to refranchise about 3,500 restaurants by the end of 2018 and achieve approximately $300 million of net annual savings on selling, general and administrative expenses by the end of 2017, are designed to position us for future growth. We continue to evaluate additional ideas to further drive shareholder value through actions that deliver sustainable long-term growth."

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