Arcos Dorados shares dip 3% on Q1 earnings miss

EditorRachael Rajan
Published 05/15/2024, 10:27 AM
© Reuters.

MONTEVIDEO, Uruguay - Arcos Dorados Holdings Inc . (NYSE: NYSE:ARCO), the largest restaurant chain in Latin America and the Caribbean and the world's largest independent McDonald's (NYSE:MCD) franchisee, reported a first-quarter earnings miss, which led to a 3% decline in its stock price.

The company reported an adjusted EPS of $0.14, falling short of the analyst consensus of $0.17. Despite the earnings miss, revenue for the quarter was $1.1 billion, surpassing the consensus estimate of $1.02 billion and marking a 9.1% increase compared to the same quarter last year.

The company's systemwide comparable sales saw a significant rise of 38.6% in the first quarter, supported by the twelfth consecutive quarter of guest volume growth. Digital channels, including Mobile App, Delivery, and Self-order Kiosks, generated 55% of systemwide sales during the period. The Loyalty Program also showed robust growth, reaching 8 million registered members, more than doubling the total at year-end 2023.

Arcos Dorados' CEO, Marcelo Rabach, commented on the results, highlighting the company's resilience and solid growth despite economic challenges in key markets. "The strength of these results demonstrate how far we have come as a company over the last decade," Rabach said. He also emphasized the balanced approach to managing pricing, product mix, and guest volumes, which drove above-inflation comparable sales growth across operations.

The company's net income was reported at $28.5 million for the quarter, translating to $0.14 per share. The Adjusted EBITDA grew by 8.4% year-over-year to $108.9 million, with Brazil and the North Latin American Division (NOLAD) delivering strong performances. However, the South Latin American Division (SLAD) faced headwinds due to significant currency devaluation in Argentina and a weaker consumption environment.

Arcos Dorados opened 22 new restaurants in the quarter, including 19 free-standing locations, as part of its strategy to accelerate restaurant openings and drive long-term growth. The company's net debt to Adjusted EBITDA leverage ratio ended the first quarter at a healthy 1.2x, indicating a solid financial position.

Looking ahead, CEO Rabach expressed confidence in the company's business model and the Three-D's strategy (Digital, Delivery, and Drive-thru), which he believes will continue to drive results and generate significant shareholder value in the future.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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