McDonald's Corporation

Hello and welcome to McDonald's first quarter 2025 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 pressing star 1 on their touchtone phone. I would now like to turn the conference over to Mr. Dexter Combele. Vice President of Investor Relations for McDonald's Corporation. Mr. Congolet, you may begin.

Good morning, everyone, and thank you for joining us. With me on the call today are Chairman and Chief Executive Officer Chris Kamchinsky and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8K 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.

Thanks, Dexter, and good morning, everyone. We entered 2025 knowing that would be a challenging time for the QSR industry due to macroeconomic uncertainty and pressures weighing on the consumer. During the first quarter, geopolitical tensions added to the economic uncertainty and dampened consumer sentiment more than we expected. We believe McDonald's can weather these difficult conditions better than most, as we have proven time and time again, and expect to outperform our competitors by harnessing the strength of our brand and the power of our global scale. We're not immune to the volatility in the industry or the pressures that our consumers are facing. Our global comp sales in the first quarter declined by 1%, and while we expected global QSR industry traffic would be down in the first quarter, actual industry traffic fell more than we anticipated in several of our large markets, including the U.S. In the U.S., overall QSR industry traffic from the low-income consumer cohort was down nearly double digits versus the prior year quarter. Unlike a few months ago, QSR traffic from middle-income consumers fell nearly as much, a clear indication that the economic pressure on traffic has broadened. However, traffic growth from the high-income cohort remains solid, illustrating the divided U.S. economy, where low- and middle-income consumers in particular are being weighed down by the cumulative impact of inflation and heightened anxiety about the economic outlook. We know that leadership in value and affordability is paramount in an environment like this, and we have been expanding and refining our value proposition to meet the needs of our consumers, especially our low- and middle-income cohorts, as well as families internationally. Building upon the actions we began to take in 2024, we now have Everyday Affordable Price Menus, or EDAP, and entry-level meal bundles in each of our Big Five international-operated markets. As we've said before, these are the building blocks of what good value means to us, pairing an EDAP menu with items priced at compelling entry-level price points with strong meal bundles. In early January in the U.S., we launched our McValue platform, which is a new branded equity similar to the Savor menu in the U.K. and the Loose Change menu in Australia, both of which have been in place for over 10 years. In this environment, we remain focused on the factors within our control, including delivering outstanding operational execution. We believe the scaled combination of our value platforms, the introduction of innovative new products, and the execution of world-class promotional and marketing campaigns provide a compelling offering for our customers, not just bringing them in the door, but offering them the feel-good moments they've come to count on from our brand. For example, just a few weeks ago, we launched a marketing campaign in partnership with a Minecraft movie, our largest global campaign yet, with participation by more than 100 markets. As part of this campaign, we've combined exclusive digital in-app and gaming experiences with in-store collectibles for fans young and old through Happy Meals and the Core Menu-inspired Minecraft Movie Meal. We're encouraged by the consumer response to the Minecraft movie campaign, and by our overall performance in April, which illustrates the benefit of our value platforms working in conjunction with full margin promotions and outstanding marketing execution. We continue to expect our guest count and market share performance will improve from the first quarter low point, driven by our emphasis on strong value and affordability execution that we have been addressing. The introduction of exciting new menu items, such as the nationwide launch of McCrispy Chicken Strips in the U.S. should contribute to this growth. However, we remain cautious about the overall health of the consumer. Before I hand it over to Ian to discuss segment performance, I also wanted to touch on the creation of McDonald's Global Restaurant Experience Team. It's significant for two reasons. First, through the new integrated structure, we'll be able to execute faster, which means ideas can start showing up in our restaurants even sooner. We can achieve and scale cross-functional product innovations like Best Burger, Big Arch, and McCrispy faster than ever before with menu, supply chain, operations, and speedy lab teams all in one place. It also increases our ability to develop and scale tech innovation in new ways, such as ready on arrival, Internet of Things-enabled restaurant equipment, and Google Cloud connectivity. through the eyes of a restaurant general manager to ensure they're all working in coordination with each other. Second, the category structure with dedicated leaders for beef, chicken, and beverages gives us better accountability and a sharper line of sight into what it takes to win in each of these verticals. Increasingly, we're competing against specialists, and so we're bringing a specialist focus into McDonald's. In beverages, for example, we've discovered some interesting learnings through our Cosmics test, which has better informed our understanding of consumers' customization preferences and interest in new emerging beverage categories. Later this year, in partnership with our franchisees, we'll be launching a beverage test in the U.S. in some of our existing McDonald's restaurants that will incorporate new menu items inspired by Cosmics. We'll share more details on this in the coming months as we continue to test learn, and position ourselves for growth in this space. As Jill McDonald steps up to lead the restaurant experience team, we welcome a new Steyart with his rich market perspective and lifelong understanding of customers' needs to the role of president of our international operated market segment. Joe Semples, previously president of the International Developmental License Markets, will now assume responsibility for McDonald's France, which is one of our largest and most important markets globally. And Dario Barone, who previously oversaw our mid-sized IOM markets, will back Phil Yeo as our IDL president. I'm immensely proud to see these proven leaders taking on new opportunities in some of our most important roles, demonstrating the depth of talent we possess within our organization. I'll now turn it over to Ian.