McDonald's expects U.S. to deliver 2021 growth after profit miss

·2 min read
FILE PHOTO: A huge advertisement for a branch of fastfood giant McDonald's is seen on the outskirts of Berlin

By Nivedita Balu and Hilary Russ

(Reuters) - McDonald's Corp expects overall sales growth in the "low double digits" in 2021, forecasting on Thursday that an increase in its U.S. market would be offset by the impact of the COVID-19 pandemic in parts of Europe.

The Chicago-based hamburger chain missed Wall Street estimates for profit and revenue in the fourth quarter, with comparable sales in its international operated markets falling 7.4%, largely due to weakness in France, Germany, Italy and Spain, where the coronavirus crisis has been intense.

Several European countries imposed tough restrictions when the pandemic surged again late last year, compounding the difficulties faced by a restaurant industry already reeling from the impact of COVID-19 for much of 2020.

Those markets are not expected to see margins return to pre-COVID levels in 2021, Kevin Ozan, Chief Financial Officer, said in a call with investors, although McDonald's still expects to open 1,300 new restaurants around the world this year.

Shares in McDonald's rose about 1% after it said global comparable sales fell 1.3% for the quarter ended Dec. 31, better than an anticipated 1.46% drop and an improvement over the previous quarter, when they fell 2.2% year-on-year.

Total revenue fell 2.1% to $5.31 billion, missing the $5.37 billion estimate. Excluding one-time items, earnings per share were $1.70, missing the average analyst estimate by 8 cents.

Comparable sales in the United States, however, rose 5.5%, beating an estimated 5.15% increase.

To drive its U.S. business, the restaurant chain has leaned on its U.S. drive-thrus, limited offers like the McRib sandwich, and celebrity collaborations such as the Travis Scott Meal.

In January, U.S. comparable sales are expected to be in the high single digits, with spending assisted by government stimulus checks, Ozan said.

The prospect of raising the U.S. federal minimum wage to $15, a measure introduced in Congress on Tuesday and supported by President Joe Biden, could be managed through "judicious" menu pricing and productivity savings, Chief Executive Chris Kempczinski said during the call.

"So long as it's done... in a staged way and in a way that is equitable for everybody, McDonald's will do just fine," Kempczinski added.

He also acknowledged tension with U.S. franchisees over costs and other issues.

"We always find our way to work through these," he said.

(Reporting by Nivedita Balu in Bengaluru; Additional reporting by Hilary Russ in New York; Editing by Anil D'Silva, Steve Orlofsky and Alexander Smith)