Full Transcript: McDonald's Q2 2026 Earnings Call

McDonald's (NYSE: MCD ) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

S. 8%. The company highlighted its 'Accelerating the Arches' strategy, which has driven significant growth over the past six years, and introduced the new 'McDonald's Next' strategy focused on elevating food quality, customer experience, and operational simplification. Future guidance includes reaching 50,000 restaurants globally by 2028, a slight delay from previous plans, and ongoing investments in digital platforms and delivery to enhance customer engagement.

S. due to overwhelming deployments and inconsistent execution of value menus, leading to plans for operational simplification and improved marketing strategies. , bringing extensive experience and a focus on driving operational improvements. Full Transcript OPERATOR Hello and welcome to McDonald's second quarter 2026 investor conference call.

At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question and answer session for investors. At that time, investors only may ask a question by pressing star-1 on their touchtone phone. I would now like to turn the conference over to Mr.

Dexter Kombale, Vice President of Investor Relations for McDonald's Corporation. Mr. Kombale, you may begin. Dexter Kombale, Vice President of Investor Relations Good morning everyone and thank you for joining us.

With me on the call today are Chairman and Chief Executive Officer Chris Kempczinski and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8-K filing also apply to our comments on the call today. Both of those documents are available on our website, as are reconciliations of any non-GAAP financial measures mentioned on today's call along with their corresponding GAAP measures. Following prepared remarks this morning, we will take your questions.

Please limit yourself to one question and then re-enter the queue for any additional questions. Today's conference call is being webcast and is also being recorded for replay via our website. And now I'll turn it over to Chris Kempczinski, Chairman of the Board Good morning everyone and thank you for joining us. Before Ian gets into the detailed results for the quarter, I want to do two things.

Recap our progress under our Accelerating the Arches strategy and highlight how McDonald's remains positioned for long-term value creation and provide a snapshot of the quarter, what worked, what didn't, and what we're doing to address our opportunities. At the end of our prepared remarks, I'll preview McDonald's Next in advance of our investor day. S. and why Sky Anderson's past accomplishments give me confidence that she's the right leader for this moment.

Almost six years ago, we unveiled our Accelerating the Arches strategy to drive our next chapter of growth and build the foundation for our digital-first future. The strategy worked. We've grown system-wide sales by roughly $40 billion and operating income by over $3 billion. We've done this by focusing on our three growth pillars, our MCDs as we like to call them.

We maximized our marketing by leaning into our fans to create cultural moments that drove consumer engagement and restaurant traffic. S. Gen Z consumer has increased and we now hold a significant advantage versus our primary competitor. The McDonald's brand remains one of one in our industry and among the most powerful brands in the world.

We committed to our iconic core menu. By focusing on our billion-dollar brands, with a particular focus on our critical beef, chicken and beverage categories, we created a global category structure to increase our pace of innovation and we're already seeing significant benefits from this focus, most notably in beverages. And we've doubled down on the four Ds. In digital, we've built the industry's largest customer platform with nearly 220 million active loyalty users and we're now among the largest loyalty programs in the world.

In delivery, we've grown an efficient business with an industry-leading cost structure that generates more than 20 billion in annual system-wide sales. In drive-thru, we've modernized operations and invested in technologies that have improved accuracy and reduced service times. And in development, we're well on our way to 50,000 restaurants thanks to the most aggressive expansion of new restaurants in our history, all while keeping our existing restaurant estate among the industry's most modernized. As we've executed against these growth pillars, we've also done the hard work behind the scenes to integrate our systems for a digital-first future.

We're now close to having all our major markets on one app, one loyalty program, one pricing engine, one HR system, and one finance system. This will drive cost savings, accelerate innovation, harden security and enhance stability. Critically, with all our data soon to be pooled in a global data lake, we'll also be well positioned to capitalize on the new opportunities afforded by artificial intelligence. You'll hear more about all of this at our investor day in September.

Now that I've recapped the progress under Accelerating the Arches and highlighted our continuing efforts toward long-term value creation, I'm going to provide a snapshot of our second quarter. McDonald's system-wide sales grew 4% in constant currency, reflecting the growing contribution from new unit openings. 3% with positive comparable sales growth across each of our operating segments. Our international markets, which contribute more than half of our system-wide sales and operating profit, continue to demonstrate that our playbook is working.

Strong execution and value offerings, menu innovation and creative marketing across many of our international markets continue to resonate with customers and supported results that were broadly in line with our expectations. S. 8% in the quarter. This was below our expectations and something we're going to address in greater detail on today's call.

We don't have a strategy problem, we simply didn't execute at the level we needed to in the second quarter. Our execution opportunities fall into three buckets: first, although we've restored our overall value and affordability leadership, our restaurant-level results show that execution was inconsistent across the system. The strongest performing restaurants consistently executed our new everyday affordable price menu and delivered strong restaurant operations. We need that same level of execution in all our restaurants.

Second, our restaurant teams were overwhelmed by too many deployments in the quarter, which led to less efficient restaurant operations. This impacted customer service times and as service times went up, satisfaction scores went down. And third, our marketing programs didn't deliver against expectations. I'm going to turn the call over to Ian now to cover our results and these execution opportunities in greater detail.

Ian Borden, Executive Vice President and Chief Financial Officer Thanks, Chris, and good morning, everyone. In the second quarter, McDonald's systemwide sales grew 4% in constant currency. 3%, reflecting a challenging consumer environment that saw QSR industry traffic in several of our largest markets continue to be flat to negative. S.

business, as Chris just highlighted. 5%. 3% for the first half. As Chris noted, we're not satisfied with our second-quarter comparable sales growth.

As we discussed on our Q1 call, we had a slow start to the quarter with comparable sales slightly negative in April as we lapped last year's highly successful Minecraft campaign. In late April, we augmented our McValue program with a new under $3 everyday affordable price, or EDAP, menu. Similar offerings have been consistently successful across our top international markets. We also added a $4 breakfast meal deal.

Inconsistent restaurant-level execution of the EDAP menu and consumer awareness levels below target resulted in lower incrementality than we expected. At the same time, the business pulled back on digital offers and removed our buy one, add one for a dollar feature to offset the investment behind McValue. In combination, all of these factors negatively impacted visits from some of our most loyal customers. We estimate that these value execution factors accounted for about two-thirds of the customer traffic underperformance relative to our expectations for the quarter.

The remainder of our underperformance can largely be attributed to our FIFA campaign in June. While the campaign provided a lift to the business and generated excellent system excitement, the campaign underperformed versus our expectations. Importantly, we're taking actions in the near term to address these opportunities. For instance, starting next week, we're launching more national digital flash offers to re-energize our high-frequency customers.

In addition, we're going to target our most loyal users with more personalized digital offerings. We'll also be reallocating marketing dollars throughout the second half of the year to increase support behind our proven value offerings such as Extra Value Meals. While we've been pleased to see our value and affordability scores improve significantly since last year, we remain ready to adjust as needed. We have been consistent we will not get beaten on value.

As Chris noted, operations metrics worsened in the quarter as restaurant teams were overwhelmed with too many complicated deployments. We've already taken steps to simplify restaurant operations by eliminating several non-customer-facing activities over the remainder of the year so that our restaurant teams can focus on delivering a great experience for our customers. S. business in a stronger position as we exit 2026.

K. again this quarter. These markets continue to demonstrate that our playbook across value, menu and marketing delivers solid results when well executed, despite a challenging industry environment. After recording slightly negative comparable sales in April, as we mentioned in our Q1 call, IOM's performance improved as expected over the balance of the quarter, with comparable sales returning towards more normalized levels in May and June, and this has largely continued into July.

On value, the majority of our top IOM markets benefited from strong EDAP menu offerings and meal deals as they have continued to respond to evolving consumer needs. Menu innovation behind chicken continued to drive growth across these markets, with Australia and Germany both gaining chicken share in the quarter. Australia generated momentum with its Korean BBQ McCrispy limited-time offering, one of the market's strongest chicken LTOs in recent years, while Germany continued its successful Chicken for Every Moment campaign featuring a mix of core products and LTOs.

Germany also successfully launched our new specialty beverage platform in early May with an assortment of crafted sodas, refreshers, cold coffee and Red Bull energizers. We're excited about the performance to date and our strong position in a category in its early stages of development. In regard to great marketing, two specific campaigns in the quarter are strong examples of how our market teams are bringing global ideas to life while executing them in locally relevant ways. The Menu Heist campaign, which we now have had success with in multiple markets, ran in Australia and showcased a curated selection of international McDonald's menu favorites, exceeding expectations.

And in Germany, Grimace returned to the market with a full menu of purple-themed offerings, driving significant social interaction including 57 million views across social platforms and reinforcing the emotional connection to our brand while benefiting top-line performance. Of our top five IOM markets, France's performance again fell short of our expectations. While it will take some time to improve alignment and execution across the system in France, we are clear on what's needed to drive performance. One element that is foundational is consistent everyday value.

The market recently extended their €4 Happy Meal component and reintroduced nationally price-pointed meal deals that are resonating with consumers. 9%. Japan again led the way by delivering its 10th consecutive quarter of positive comparable guest count growth. This reflects strong execution behind our loyalty platform, which launched less than a year ago and already has nearly 20 million 90-day active users who are visiting us more often.

The segment's comparable sales growth was tempered by results in China, where we expect the macro environment and the consumer backdrop to remain challenging in the near term. 03 benefit from foreign currency translation. On a constant currency basis, this represents a 5% increase versus the prior year. 15 from the impact of foreign currency translation on full-year 2026 adjusted EPS based on current exchange rates.

30 tailwind. As always, this is directional guidance only because rates will continue to change as we move throughout the remainder of the year. 9%, highlighting the resiliency of our business model. 2% of systemwide sales, consistent with our expectations for the quarter and included expenses associated with our biennial worldwide convention with franchisees.

2% of systemwide sales for the full year. Chris and I are focused on managing our enterprise cost structure. We've made investments over the last couple of years to consolidate and upgrade our global systems and processes, with a clear goal of delivering future efficiency in 2027. We expect that we'll begin to see the benefits from those investments as we seek to lower G&A percentage spend.

S. company-operated restaurants, we continue to evaluate the optimal franchisee versus company ownership balance to maximize system value. S. and international markets, we expect incremental company-owned restaurant divestitures, some of which occurred in the second quarter, to continue in 2026 and beyond.

We'll provide more details on our refranchising efforts and our G&A outlook during our Investor Day in September. We continue to be highly disciplined allocators of capital towards new restaurants based on our ability to generate attractive returns. We've completed our new restaurant pipeline analysis that Chris and I spoke about last quarter. Due to the current pressured consumer environment, coupled with the cumulative inflationary impact on development costs, we now expect to reach 50,000 restaurants globally in 2028.

That's a slight adjustment to our previous plans to reach that level by the end of 2027. Yet even with this change, this continues to be the fastest period of restaurant growth in McDonald's history, and we remain on track to open about 2,600 gross restaurants by the end of this year. As we look ahead, Chris and I remain very confident about our pathway to enhancing shareholder value. We have both led large parts of the operating business in prior roles and have demonstrated the ability to proactively address and solve issues to drive strong performance.

That's exactly what we're working together to accomplish in the coming quarters. And with that, let me turn it back over to Chris. Chris Kempczinski, Chairman of the Board Thanks, Ian. S.

are largely execution-focused and we're acting with urgency to address them. At the same time, we're equally focused on driving sustainable long-term growth and strengthening our competitive advantages. That's why at our worldwide convention in June we introduced McDonald's Next, our new growth strategy with a clear ambition to be more customers' first choice.