Is McDonald’s Dependence On High Growth Markets Increasing?
In mid-2015, McDonald’s (NYSE:MCD) started operating under a new structure that classifies segments and combine markets with similar characteristics and opportunities for growth. Under the structure, the broad classification is:
- U.S.: It is McDonald’s largest segment, responsible for a majority of the company’s revenues.
- International Lead Markets: It consists of established markets including Australia, Canada, France, Germany, the U.K., and related markets.
- High Growth Markets: These markets are believed to have relatively higher restaurant expansion and franchising potential including China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands, and related markets.
- Foundational Markets & Corporate: The remaining markets in the McDonald’s system, consisting of Asia, Europe, Latin America, Africa and the Middle East. Each of these markets are believed to have the potential to operate under a franchised model.
- Looking Beyond The Golden Arches: Drop McDonald’s Stock, Pick This Conglomerate?
- Down 14% YTD, What Lies Ahead For McDonald’s Stock Following Q2 Earnings?
- Down 12% This Year, What’s Happening With McDonald’s Stock?
- Dropping 8% Year To Date, Will McDonald’s Stock Recover Post Q1 Results?
- What To Expect From McDonald’s Q4 After Stock Up 13% Since 2023?
- After A 14% Top-Line Growth In Q2 Will McDonald’s Stock Deliver Another Strong Quarter?
Lately, McDonald’s has been laying a lot of stress on its “High Growth Markets,” consisting of large countries like China and Russia. Its efforts at attracting customers include creating excitement through a customized menu, promotions, and implementing an improved digital strategy. In 2015, the company opened over 400 new restaurants in the region. The High Growth markets include approximately half of the total planned global openings for 2016, of which 400-500 restaurants are expected to be set up in China. This indicates McDonald’s increasing reliance on the segment for its future growth.
In terms of constant currency, revenues from the high growth markets have consistently increased year on year. However, the foreign currency headwinds being witnessed due to a stronger dollar have affected the revenues and comparable store sales data adversely.
As the FX headwinds subside, and McDonald’s finishes its re-franchising program in 2018, we can expect the high growth market to return to growth and be responsible for the company’s turnaround.
Have more questions on McDonald’s? See the links below.
- McDonald’s Versus Burger King: Whose Franchisees Perform Better?
- McDonald’s Slows Down In Q2’16, Despite Growth In Comparable Store Sales
- McDonald’s Q2 FY 2016 Earnings Preview: Investment In Quality, All Day Breakfast To Drive Revenues
- McDonald’s 2016 Revenues To Decline YoY Despite Improvement; To Pick Up Pace Thereafter
- What’s McDonald’s Fundamental Value Based On Expected 2016 Results? (Updated After Q1 2016)
- By What Percentage Have McDonald’s Revenues And EBITDA Grown Over The Last Five Years?
- What Is McDonald’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
- How Has McDonald’s Revenue And EBITDA Composition Changed Over 2011-2015?
- McDonald’s Q1 FY 2016 Earnings Preview: All Day Breakfast To Drive Comp Sales In The US
- Where Will McDonald’s Revenue And EBITDA Growth Come From Over The Next Three Years? (Updated After Q1 2016)
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)