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MONTEVIDEO - On Wednesday, Arcos Dorados Holdings Inc. (NYSE:ARCO), Latin America’s largest McDonald’s franchisee, reported second quarter earnings that exceeded analyst expectations, though revenue fell short of estimates.
The company’s shares were down 1.44% in pre-market trading following the announcement.
The company posted adjusted earnings of $0.11 per share for the second quarter, significantly outperforming the analyst consensus of $0.07. However, total revenue of $1.14 billion missed the expected $1.15 billion, despite growing 2.8% from the same period last year.
Systemwide comparable sales increased 12.1% YoY, with particularly strong performance in the NOLAD (North Latin America Division) and SLAD (South Latin America Division) regions, which grew 1.8x and 1.4x above blended inflation rates, respectively. The company’s digital channels continued to drive growth, with digital sales rising 7.9% and accounting for over 60% of total systemwide sales in the quarter.
"The results we are reporting today demonstrate the strength of the Arcos Dorados business model," said Luis Raganato, Chief Executive Officer. "Each of our markets faced a unique set of operating conditions and each delivered strong results within the context of their environments."
Adjusted EBITDA was $110.1 million, down 7.3% from the previous year, primarily due to margin pressure in Brazil from higher beef costs and the absence of a one-time labor contingency reduction that benefited the prior year’s results.
The company’s Loyalty Program reached 21.5 million registered members across six markets by quarter-end, contributing 22.6% of total sales in those markets. Arcos Dorados also expanded its footprint, opening 20 new Experience of the Future restaurants during the quarter and acquiring three restaurants in Saint Martin, making it the company’s 21st territory.
The company maintained a comfortable financial position with a net debt to Adjusted EBITDA ratio of 1.4x, which was cited as a factor in S&P Global’s recent assignment of a ’BBB-’ investment grade rating to the company’s debt.
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