This is an English adaptation of a FoodBud historical article originally published on July 27, 2022.
On July 27, McDonald’s reported second-quarter 2022 results: revenue was $5.7 billion, down 3% year on year, and net income was $1.19 billion, down 46%.
McDonald’s reports its business across three segments: the U.S., International Operated Markets, and International Developmental Licensed Markets. As of June 30, 2022, it had 39,696 restaurants globally, after having crossed 40,000 at the end of 2021. China had 4,727 restaurants.
CFO Kevin Ozan said China had been through several very difficult years, but McDonald’s still saw major opportunity there and expected to open 800 new restaurants in China in 2022.
Globally, 95% of McDonald’s restaurants were franchised, supported by roughly 5,000 franchisees.
Second-quarter revenue by segment was:
In the most recent 90-day quarter, McDonald’s had nearly 22 million active members in the U.S. The company said MyMcDonald’s Rewards helped lift sales, while reward redemptions and coupon sharing gave McDonald’s better customer insight and helped it connect with members more efficiently, increasing spend and purchase frequency.
Digital sales represented more than half of revenue in Germany, France, the U.K., and China. In China, digital accounted for more than 80%.
CEO Chris Kempczinski also highlighted Australia, where McDonald’s was using McCafe’s brand strength to expand share in coffee. FoodBud noted separately that Wenjidou, a coffee-machine supplier backed by Manner, had supplied coffee machines to McDonald’s in Australia.
The Russia-Ukraine war meant McDonald’s could no longer operate in Russia in line with its business goals and values, so it exited the Russian market in May. Russia had represented 2% of McDonald’s systemwide sales and 7% of revenue.
Kempczinski said the global environment was changing quickly and becoming less predictable. U.S. inflation had reached its highest level in 40 years, macro uncertainty had increased over the prior six months, and Europe was facing war.
On inflation and pricing, McDonald’s expected broad product price increases to remain elevated. Even with price increases, traffic stayed strong at about 70% of historical levels.
Consumer behavior had shifted after the pandemic. Delivery orders increased, while drive-thru orders began to normalize as the pandemic stabilized. McDonald’s also saw lower-income customers buying fewer meal bundles in the first quarter.
Against rising raw-material costs and labor pressure, McDonald’s was trying to balance price increases with customer value. Kempczinski added that the gap between food-at-home and food-away-from-home spending was widening; he said the current price gap was the largest he had seen in 50 years, with food-at-home prices rising much faster than food away from home.
From a value-for-money perspective, he said McDonald’s led its peers in most of its markets, with two exceptions: China and Spain.
On automation, Kempczinski said robots and similar technologies may make good headlines but were not practical for most restaurant units. He argued that many robotic systems were not cost-effective, stores might not have enough space, and infrastructure changes would be required. He was more positive on systems and technology for data collection and analysis, such as labor scheduling and procurement, to help stores reduce labor costs.
In June, McDonald’s announced that Ian Borden, president of International, would become CFO effective September 1. Current CFO Kevin Ozan would move to senior executive vice president for strategic initiatives.
Ozan had worked at McDonald’s for 30 years in senior finance roles. He previously oversaw the company’s Asia Pacific, Middle East, and Africa operations and had served as general manager of McDonald’s Ukraine.
During Ozan’s tenure, McDonald’s systemwide sales grew 25% to more than $100 billion, global restaurant count grew by more than 10%, and McDonald’s stock appreciated 150%.
McDonald’s also said global chief supply chain officer Francesca DeBiase would leave in August, and Marion Gross, then head of North America supply chain, would succeed her.
Two further appointments were announced. Jill McDonald would return to McDonald’s as president of International Operated Markets. Her career began at British Airways; she later joined McDonald’s as CMO of the U.K. business, became managing director of McDonald’s U.K. and president of the Northern Europe market, and also served as CEO of Costa Coffee.
Jo Sempels would continue as president of International Developmental Licensed Markets, which includes China, and would continue reporting directly to Ian Borden.
Chipotle also reported second-quarter results. Revenue was $2.2 billion, up 17% year on year, and net income was $260 million, up 38.5%. Digital sales accounted for 39% of total revenue, and membership reached 29 million.
Chipotle opened 42 restaurants in the second quarter, including 32 Chipotlane formats. As of June 30, it had 3,052 restaurants across the U.S., Canada, the U.K., France, and Germany, including 430 Chipotlanes. Fifteen percent of restaurants were near universities. Average annual restaurant sales were $2.747 million.
Chipotle’s long-term target for North America was 7,000 restaurants. The company linked its performance to five strategies:
Chipotle had previously launched Cultivate Next, a $50 million fund. It was preparing to invest in two companies: kitchen-automation company Hyphen and alternative-protein company Meati Foods. Hyphen’s automation equipment could produce more than 350 meals per hour. Meati Foods had completed a $150 million Series C financing round.
Note: Forward-looking store targets, investment plans, financing figures, and stock-performance figures are historical references from the 2022 source article.