Earnings Call: Q2 2025

Aug 8, 2025

Summary

H1 system-wide sales rose 6.4% YoY and operating income increased ¥2.4B to ¥26.2B. The full-year earnings forecast was revised, while restaurant upgrades and value initiatives remain central to growth plans.

Thomas Ko. Thank you so much for joining our online earnings results briefing today despite your busy schedules. I would like to report on the earnings results for the first half of 2025. First, let me begin with the highlights of our performance. System-wide sales were JPY 429.7 billion, up 6.4% year-on-year. Same-store sales increased by 4.9% compared to the same period last year and posted 39 quarters of consecutive growth since Q4 2015. I believe that the continuous efforts made to enhance QSC and convenience by listening to the voices of our customers, active investments in areas such as marketing, restaurant, and people, plus the support of our owner-operators and our suppliers all led to this increase in sales. In terms of income, combining both the increase in system-wide sales and improved efficiency, we saw year-over-year operating income growth of JPY 2.4 billion, reaching JPY 26.2 billion. The number of new restaurants opened was 26, bringing the total number of restaurants to 2,989 as of the end of June. We have started a new medium-term management plan from this fiscal year. In a difficult and uncertain market environment, we have steadily implemented measures to improve the restaurant experience, which has resulted in an increase in customer numbers at existing restaurants during the first half of the year, and system-wide sales also exceeding the same period last year. Regarding the earnings forecast, in light of the first-half results, we have revised our full-year earnings forecast announced in February of this year. Yoshida-san will explain this later. This is the medium-term management plan. To continue being the most beloved restaurant brand in Japan, McDonald's will strive to grow further through the enhancement and expansion of the community-based franchise business. To be specific, our growth strategies focuses on the three areas of menu and value, restaurant portfolio and digital, and sustainability and people. Let me explain our activities from the first half of the year in the following slides. First is menu and value. This is a strategy to enhance McDonald's brand experience and affordability for our customers to meet the needs of a broader range of customers and cater to a variety of dining occasions. In addition to the standard menu items unique to McDonald's, limited-time offers are made available to help bring seasonality and fun to our customers for each of the four seasons here in Japan. Efforts have been made to deliver excitement to our customers in order to expand our fan base. Additionally, with operations and services offered to our customers through everyday efforts, our surveys have found that the score for "Has food I want to eat" also reached a record high level. Meanwhile, as a brand that feels familiar and can be visited freely, strategic value measures are being rolled out to offer affordability to our customers. We aim to enhance customers' experience by actively investing in our restaurants and offering high-level QSC. These efforts enable our customers to feel a sense of value that goes beyond price. This March, price revisions were made to mitigate the cost pressures that our owner-operators and our restaurants are facing. However, we continue to activate relevant value initiatives such as Hirumac, ¥500 set, and a Tokuninarudo campaign that would satisfy the needs of our customer. This balanced approach is very important for our business growth in the future. By leveraging our holistic pricing and value initiatives, we are able to continue to increase the number of customers visiting our restaurants. It is very important for us to implement measures that would give affordable offers to our customers that are in line with their expectations. This effort will help us to drive momentum for future growth. In the second half of the year, along with the exciting campaigns, activities will be continued to further enhance our brand value to spur demand by promoting actions that keep even closer to our customers. Next is restaurant portfolio and digital. To enhance the restaurant experience for both our customers and employees for the future, it is important for us to focus on upgrading our restaurant portfolio. By proactively developing new restaurants, we are able to serve more customers and provide top-class restaurant experience to them. We are also closing restaurants that may not have sufficient capacity. As we continue to improve sales and profitability of our restaurants, we will also strengthen and expand our franchise business that will allow our owner-operators to stay close to the communities where they operate their restaurants. In the first half of the year, we opened 26 new restaurants and closed 25. As the increase in system-wide sales indicates, restaurant replacement is progressing smoothly, and we are making steady progress towards building an optimal restaurant portfolio. We expect this to accelerate further in the second half of the year, resulting in a net increase of around 30 restaurants for the year. Another key initiative for restaurant development activities has been the remodeling of existing restaurants. Investments will be made throughout the system to reform the restaurant layout. Through the further enhancement of capacity and efficiencies of operations, we will aim to deliver even better restaurant experiences to our customers. This initiative is the key to our business growth going forward and is essential to creating new value for the future. Efforts will be made system-wide to achieve the target of remodeling 1,000 restaurants and maximize the potential of restaurants by 2027. As of now, we have already identified 300-plus restaurants for remodeling. We are considering the layout of each restaurant to maximize the use of digital technology and improve the restaurant experience for customers. Most of those remodeling will be completed by end of 2025 and early 2026. We are staying on track to remodel 1,000 restaurants by 2027. For the enhancements of the customer experience and improvement in profitability that McDonald's is aiming for, we intend to go forward by building even stronger partnership with franchise companies, including owner-operators. Regarding digital, to ensure sound growth over the mid to long term, focus will be on enhancing and evolving the customer experience even further. We have enhanced customer convenience significantly by increasing the number of sales channels to meet customer needs, such as mobile ordering, delivery, and the introduction of touch panel order terminals. By making use of digital capabilities, it has become possible for employees to offer customer service with higher hospitalities while achieving more efficient operations in the restaurant. By enhancing and reviewing our menu platforms and operational processes, we are taking actions to reduce complexity at restaurants, which will help to optimize operations and improve profits without compromising customer services. We'll continue to accelerate the fusion of digital and people at all our restaurants to enhance restaurant experiences for our customers and employees. The last is sustainability and people. McDonald's has a global goal to reduce greenhouse gas emissions to virtually zero by 2050. As a part of this, we enter into corporate PPAs for solar power in the Kansai and Kantō areas last December, and we are in the process of sourcing renewable energy for our restaurants. Additionally, we have committed to replace all packaging materials offered to customers with renewable, recycled, or certified materials by the end of 2025. As one example, we announced in May that more environmentally friendly carryout bags will be rolled out nationwide, with biomass plastic increased from 50% to 95%. This started in Nagasaki Prefecture in May and will be expanded nationwide later this year. Efforts to reduce the burden on the environment are important investments for McDonald's going forward. Finally, to deliver our mission to make delicious, feel-good moments easy for everyone, we will make sure our teams continue to work together, taking innovative steps to create new value for the future and exceeding customer expectations. The key has been and will always be our people. When I was appointed CEO last July, I made a commitment to spend a large amount of time visiting our restaurants. The purpose was to get a better understanding of our customers, to have discussions with franchisees and restaurant managers to achieve great restaurant operation, and to share my thoughts on how to further elevate efficiencies and profitability at our restaurants. I also wanted to understand issues facing the restaurants and express my appreciation to all restaurant managers and crew. I always bear this in mind. Every July 20th marks the foundation day for McDonald's Japan. As usual, this July, we support office staff, conducted activities in the restaurant to return to the basics and convey gratitude to crew, customers, and the community by offering warm McDonald's hospitality. I want to build a strong one team by taking care of our people, enabling each and every person working at McDonald's to demonstrate their own abilities and offering an environment where opportunities for growth can be enjoyed. In the second half of the year, we'll focus on the growth strategy of our medium-term management plan and aim to become the most beloved restaurant brand in Japan by further elevating the strengths of McDonald's with all of our power, the power of our brand, our restaurants, and our people. This concludes my presentation. Next, Yoshida-san will explain our financial results for the first half and full-year earnings outlook.