Daily Management Review

McDonald's To Spend More On Tech And R&D In 2020


McDonald's To Spend More On Tech And R&D In 2020
The revamped strategy of one of the largest fast food chains of the world McDonald’s of restructuring its stores and adding more food items to its menu to lure in more customers and gain more market share will get a boost as the company announced plans for more spending on technology and research in 2020. The company beat market estimates and forecasts for sale in the fourth quarter.
The company reported comparable sale growth globally for the fourth quarter to be the highest of the company in the last decade, said the Chief Executive Officer of the company Chris Kempczinski who was appointed to the post in November after the firing of the previous CEO.
There was a 5.9 per cent growth in global comparable sales as reported by McDonald's, for both the fourth quarter as well as the whole of 2019. According to IBES Refinitiv, that number easily beat the market estimates of a 5.23 per cent growth for both the periods.
For the current year, a growth of between 5 per cent and 7 per cent in constant currency in selling, general and administrative expenses spending on tech was forecast by the company.  The number for the last year was at just 1.3 per cent. This is because of continued investment by the company in technology, research and development.
There have been a number of changes that have been implemented by McDonald’s over the last few years aimed at enhancing the dining experience of customers such as by installing kiosks and digital displays at the stores, boosting its delivery services and expanding the menu by addition of new burgers, beverages and breakfast items. While also investing in store modernization throughout bits outlets across the world, McDonald’s has also acquired two smaller technology firms which with the aim of focusing more on digitizing of its stores and drive-thru menus.
In the quarter ended December 31, there was a growth of 5.1 per cent in the sales on the company’s US restaurants open for more than 13 months which was a little higher than the estimates of 4.67 per cent growth. However during the quarter, there was a 1.9 per cent drop in the guest numbers for its US restaurants with an overall global increase of just 1 per cent.
"Returning to guest count growth in the U.S. remains our top priority," Chief Financial Officer Kevin Ozan said in a post-earnings call. "Sluggish industry traffic growth and unit expansion continue to fuel an aggressive battle for market share,"
The earnings per share of the company for the quarter came in at $1.97 per share, excluding one-time items, which was a little more than market expectations. That earning was against a 14 per cent growth in net income to $2.08 per share. Revenue growth of 3.6 per cent at $5.35 billion for the quarter was reported by the company which was slightly over market estimates of $5.31 billion.