What is in this article?:
- McDonaldâ€™s maintains growth plans despite difficulties
- Opportunities around the world
Executives say the company will stick with its goals for sales and unit growth, reimaging and digital innovation for 2014.
McDonald’s Corp. executives said the company will stick with its long-term goals as it moves into 2014 despite facing continued economic difficulties.
Company executives acknowledged during its biannual investor meeting that 2013 was a difficult year, with a stagnant dining industry depressing the top line while cost pressures from commodities and labor chipped away at the bottom line. But while the global and U.S. macro economies are not projected to improve much in 2014, McDonald’s officials nonetheless reiterated the company’s long-term annual target of systemwide sales growth between 3 percent and 5 percent.
“We don’t see significant changes [in macroeconomic trends] versus 2013, but we realize our performance isn’t entirely driven by the external environment,” chief financial officer Pete Bensen told investors at the chain’s Oak Brook, Ill., headquarters. “We’re focused on what is within our control: leveraging consumer insights, taking an honest assessment of our execution and sharing best practices with our markets around the world.”
The chain will focus on growing market share in the quick-service category by trying to attract consumers to “trade into” McDonald’s from outside the quick-service segment, increase the frequency of current guests and capture additional customers who might return to eating out when the economy recovers, chief executive Don Thompson said.
“All companies today are fighting even harder for growth in this environment, and we’re no exception,” he said. “We’re making adjustments as we strive to understand shifting dynamics. We can’t control how consumers respond to the environment, but we know our customers still want affordable food and beverage choices in convenient, contemporary restaurants.”
McDonald’s will have between $2.9 billion and $3 billion in capital expenditures in 2014, officials said.
Long-term targets remain intact
McDonald’s plans to open between 1,500 and 1,600 restaurants around the world next year.
“The biggest increase will come in APMEA, where most of the emerging-market opportunity resides,” Bensen said. “We’re not growing just for growth’s sake; we’re pursuing targeted opportunities.”
He added that the chain would remodel another 1,000 restaurants in 2014, which represents a natural deceleration of the pace of the McDonald’s reimaging program, as many markets near completion of the effort. In the United States, company and franchised restaurants would place more focus on expanding kitchen capacity in the back of the house, so the company has pushed many planned exterior remodeling projects to 2015, Bensen said.
In addition to investing in new restaurants and remodels, McDonald’s also is projected to raise its general and administrative expenses in 2014, by $200 million, to fund capacity enhancements in the restaurants, more digital platforms in marketing, and operations improvements, as well as its Worldwide Owner-Operator Convention and its sponsorship of the Winter Olympics in Sochi, Russia.
Labor costs are expected to increase slightly around the world, officials said, and projections for food cost inflation range between 1 percent and 2 percent in the United States and between 1.5 percent and 2.5 percent in Europe. Nonetheless, McDonald’s maintained its long-term annual growth target of a 6-percent to 7-percent increase in operating income.