McDonald’s Corporation’s (MCD) CEO Don Thompson on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

McDonald’s Corporation (NYSE:MCD)

Q2 2014 Results Earnings Conference Call

July 22, 2014, 11:00 AM ET

Executives

Kathy Martin – VP of Investor Relations

Don Thompson – President and CEO

Peter J. Bensen – SEVP and CFO

Analysts

Brian Bittner – Oppenheimer & Co.

Matt DiFrisco – Buckingham Research

Joe Buckley – Bank of America Merrill Lynch

David Tarantino – Robert W. Baird & Co.

David Palmer – RBC

Jeffery Bernstein – Barclays

Jeff Farmer – Wells Fargo

John Glass – Morgan Stanley

Jason West – Deutsche Bank

Sara Senatore – Sanford Bernstein

Bryan Elliott – Raymond James

John Ivankoe – JPMorgan

Keith Siegner – UBS

Paul Westra – Stifel Nicolaus & Co.

Operator

Hello and welcome to McDonald’s July 22, 2014 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. (Operator Instructions).

I would now like to turn the call over to Ms. Kathy Martin, Vice President of Investor Relations for McDonald’s Corporation. Ms. Martin, you may begin.

Kathy Martin – VP of Investor Relations

Thank you. Good morning everyone and thanks for joining us. With me on the call are our President and Chief Executive Officer, Don Thompson and our CFO, Pete Bensen. Today’s conference call is being webcast live and recorded for replay by phone, webcast, and podcast.

And before I turn it over to Don I want to remind everyone that the forward-looking statements in our earnings release and 8-K filing also apply to our comments. And both documents are both available at www.investor.mcdonalds.com, as are reconciliations of any non-GAAP financial measures mentioned on today’s call with their corresponding GAAP measures.

Now I’d like to turn it over to Don.

Don Thompson – President and CEO

Thank you, Kathy and good morning everyone. Before I discuss our second quarter results I wanted to provide a brief perspective on our performance relative to our expectations. I also want to share with you how our strategies have evolved, to guide our actions going forward. As we shared with you at our Investor meeting last November and in the last couple of quarterly calls we entered 2014 well aware of the challenges we face for comparable sales and margins amid ongoing broad based challenges and cost pressures throughout our P&L. And we don’t expect any material changes to this operating environment in the second half of the year.

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Our financial model is built on growing comparable sales, which in turn drive profitability. So when comparable sales are relatively flat as in second quarter our ability to grow income is significantly impacted. We’ve often said that there is no one silver bullet or single solution for driving sustained growth. In fact the key to our success over time has been that we’ve executed multiple initiatives simultaneously. Enduring success requires an ever stronger foundation. So we’re pushing forward on a multiple fronts as we focus on those areas within our control to enhance our relevance and appeal to consumers.

Earlier this year we evolved our Plan to Win Framework, refocusing our planning and actions on what matters most to our customers; relevant food choices, easier engagement with our brand through digital and greater transparency into the quality of our food and what we stand for as a brand. Serving good food through good people and being a good neighbor in the communities in which we operate is what McDonald’s stands for.

In April we shared our updated global Plan to Win framework with the more than 15,000 franchises, suppliers and company employees at our Biannual Worldwide Convention. Our decentralized system is now moving forward as we run with more than 35,000 restaurants in 119 countries aligned around an evolved global Plan to Win framework and executing in a way that takes into account local consumer needs and local business environments.

As we work to regain business momentum we are pursuing two parallel paths. First, we are strengthening key foundational elements of our business to deliver our better overall customer experience today. And second, we are making progress on comprehensive strategies in pursuit of the sizeable growth opportunities that lie before us. These activities are interrelated and together they position us to drive profitable growth over the long turn.

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Let me talk first about the work currently underway for foundational elements of our business today. These include value first. We are evaluating the relationship between pricing and quality perception across our menu board and that’s because value is one of our grand pillars. So we must continue to fortify our position within this key consumer attribute.

Second, operations and service; around the world we are enhancing our operations and service platforms to improve the customer experience and ultimately increase visits. This includes the service reset in the United States and servicing kitchen enhancements in Europe.

Third, marketing. We are taking actions to reestablish our marketing leadership position globally. In some markets, this means adding fresh perspectives by bringing in new leadership or agency partners. In others it means heightening our awareness of how customers use McDonald’s and creating stronger messages to reinforce our place in customers’ lives. And around the world we are also strengthening our creative messages by placing greater emphasis on the quality of our food and again reestablishing the emotional connection that our customers associate with the McDonald’s experience.

The fourth area is simplification. We are streamlining our merchandizing menu board and product offerings and in addition to making it easier for customer to order their favorite products, this will reduce complexity in our restaurants which in turn should enhance accuracy and speed of service.

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