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McDonald's Q1 2025 · Earnings

McDonald’s (MCD) began 2025 facing a challenging global landscape, as reflected in its Q1 results, which showed modest declines across key financial metrics while reaffirming its long-term growth ambitions. Total revenues declined 3% year-over-year (YoY) to $5.96 billion, or 2% in constant currencies, amid macroeconomic and geopolitical pressures, including the ongoing conflict in the Middle East and unfavorable foreign exchange movements.

Operating income slipped 3% YoY to $2.65 billion, with a 2% decline excluding restructuring charges. Net income also edged lower to $1.87 billion, down from $1.93 billion a year ago. Correspondingly, diluted EPS decreased 2% to $2.60, though adjusted EPS excluding restructuring impacts was $2.67, down just 1% and up 1% in constant currencies.

Performance varied across segments. In the U.S., revenue fell 4% to $2.40 billion, while comparable sales dropped 3.6%, a sharp reversal from a 2.5% gain in Q1 2024, reflecting softer consumer traffic and economic uncertainty. The International Operated Markets (IOM) saw a 3% decline in revenue to $2.86 billion, with comparable sales down 1.0%. However, the International Developmental Licensed Markets (IDL) delivered a bright spot: despite a 15% drop in revenue (due to the prior year’s sale of the South Korea business), comparable sales grew 3.5%, and franchised sales climbed 6% (or 10% in constant currencies), boosted by strong performance in markets like China and Israel.

Globally, comparable sales declined 1.0%, though were essentially flat when adjusting for the Leap Day in 2024. Systemwide sales held steady at $28.8 billion, up 2% in constant currencies, with gains in IDL markets offsetting declines elsewhere.

Profitability softened, with franchised margins declining to $3.04 billion and company-operated margins falling to $273 million. Rising interest expenses and lower interest income also weighed on the bottom line, reflecting a higher debt burden and reduced cash balances.

Despite these headwinds, McDonald’s reaffirmed its strategic priorities. Under its “Accelerating the Arches” plan, the company continues to invest in digital platforms, menu innovation, and restaurant development. Loyalty program engagement remains strong, with over 170 million 90-day active users contributing $8 billion in systemwide sales during the quarter.

The company is targeting the opening of approximately 2,200 restaurants in 2025, with over 1,600 in IDL markets, including 1,000 in China. Management expects this expansion to contribute more than 2% to systemwide sales growth. Capital expenditures are planned at $3.0–$3.2 billion, focused heavily on new unit development in the U.S. and IOM.

Looking ahead, McDonald’s maintains its full-year operating margin outlook in the mid-to-high 40% range, above the 46.3% adjusted margin achieved in 2024. While foreign currency headwinds are expected to reduce 2025 EPS by $0.20–$0.30, management remains confident in the brand’s ability to drive market share gains, supported by its 95% franchised model, stable cash flows, and commitment to returning all excess free cash flow to shareholders.

CEO Chris Kempczinski underscored this resilience, noting, “Consumers today are grappling with uncertainty, but they can always count on McDonald's… for exceptional value, from a brand they love.”

May 2, 2025
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