“In 2027, we expect that we'll begin to see the benefits from those investments as we seek to lower G&A percentage spend.”

In context

“Ian Borden (Chief Financial Officer): Thanks, Chris, and good morning, everyone. In the second quarter, McDonald's system-wide sales grew 4% in constant currency. Global comparable sales grew 1.3%, reflecting a challenging consumer environment that saw QSR industry traffic in several of our largest markets continue to be flat to negative. Global comparable sales were also impacted by execution that was below our expectations in the U.S. business, as Chris just highlighted. For the first half of the year, system-wide sales grew 5% in constant currency and global comparable sales increased 2.5%. Starting with the U.S. Comparable sales grew 0.8% for the quarter and 2.3% for the first half. As Chris noted, we're not satisfied with our second quarter comparable sales growth. As we discussed on our Q1 call, we had a slow start to the quarter with comparable sales slightly negative in April as we lapped last year's highly successful Minecraft campaign. In late April, we augmented our McValue program with a new under $3 Every Day Affordable Price or EDAP menu. Similar offerings have been consistently successful across our top international markets. We also added a $4 Breakfast Meal Deal. Inconsistent restaurant level execution of the EDAP menu and consumer awareness levels below target resulted in lower incrementality than we expected. At the same time, the business pulled back on digital offers and removed our Buy One, Add One for $1 feature to offset the investment behind McValue. In combination, all of these factors negatively impacted visits from some of our most loyal customers. We estimate that these value execution factors accounted for about two-thirds of the customer traffic underperformance relative to our expectations for the quarter. The remainder of our underperformance can largely be attributed to our FIFA campaign in June. While the campaign provided a lift to the business and generated excellent system excitement, the campaign underperformed versus our expectations. Importantly, we're taking actions in the near term to address these opportunities. For instance, starting next week, we're launching more national digital flash offers to reenergize our high-frequency customers. In addition, we're going to target our most loyal users with more personalized digital offerings. We'll also be reallocating marketing dollars throughout the second half of the year to increase support behind our proven value offerings such as Extra Value Meals. While we've been pleased to see our value and affordability scores improve significantly since last year, we remain ready to adjust as needed. We have been consistent. We will not get beaten on value. As Chris noted, operations metrics worsened in the quarter as restaurant teams were overwhelmed with too many complicated deployments. We've already taken steps to simplify restaurant operations by eliminating several non-customer-facing activities over the remainder of the year so that our restaurant teams can focus on delivering a great experience for our customers. In short, we're acting with urgency to improve our baseline guest traffic and put the U.S. business in a stronger position as we exit 2026. Now turning to the International Operated Markets. Comparable sales increased 1.5%, driven by Germany, Australia and the U.K. again this quarter. These markets continue to demonstrate that our playbook across value menu and marketing delivers solid results when well executed despite a challenging industry environment. After recording slightly negative comparable sales in April, as we mentioned in our Q1 call, IOM's performance improved as expected over the balance of the quarter, with comparable sales returning towards more normalized levels in May and June, and this has largely continued into July. On value, the majority of our top IOM markets benefited from strong EDAP menu offerings and meal deals as they have continued to respond to evolving consumer needs. Menu innovation behind chicken continued to drive growth across these markets, with Australia and Germany both gaining chicken share in the quarter. Australia generated momentum with its Korean Barbecue McCrispy limited time offering, one of the market's strongest chicken LTOs in recent years, while Germany continued its successful Chicken for Every Moment campaign featuring a mix of core products and LTOs. Germany also successfully launched our new specialty beverage platform in early May with an assortment of crafted sodas, refreshers, cold coffee and Red Bull Energizers. We're excited about the performance to date and our strong position in a category in its early stages of development. In regard to great marketing, two specific campaigns in the quarter are strong examples of how our market teams are bringing global ideas to life while executing them in locally relevant ways. The Menu Heist campaign, which we now have had success with in multiple markets, ran in Australia and showcased a curated selection of international McDonald's menu favorites exceeding expectations. And in Germany, Grimace returned to the market with a full menu of purple-themed offerings, driving significant social interaction, including 57 million views across social platforms and reinforcing the emotional connection to our brand while benefiting top line performance. Of our top five IOM markets, France's performance again fell short of our expectations. While it will take some time to improve alignment and execution across the system in France, we are clear on what's needed to drive performance. One element that is foundational is consistent everyday value. The market recently extended their EUR 4 Happy Meal component and reintroduced nationally price-pointed meal deals that are resonating with consumers. Turning to the International Developmental Licensed Markets. Comparable sales increased 1.9%. Japan again led the way by delivering its tenth consecutive quarter of positive comparable guest count growth. This reflects strong execution behind our loyalty platform, which launched less than a year ago and already has nearly 20 million 90-day active users who are visiting us more often. The segment's comparable sales growth was tempered by results in China, where we expect the macro environment and the consumer backdrop to remain challenging in the near term. Turning to the P&L. Our top line performance drove adjusted earnings per share of $3.38, which included a $0.03 benefit from foreign currency translation. On a constant currency basis, this represents a 5% increase versus the prior year. We currently estimate a tailwind of about $0.15 from the impact of foreign currency translation on full year 2026 adjusted EPS based on current exchange rates. That's down from our previously estimated range of a $0.20 to $0.30 tailwind. As always, this is directional guidance only because rates will continue to change as we move throughout the remainder of the year. In the second quarter, we generated more than $4 billion in restaurant margins, and our year-to-date adjusted operating margin was 46.9%, highlighting the resiliency of our business model. General and administrative expenses were 2.2% of system-wide sales, consistent with our expectations for the quarter and included expenses associated with our biennial worldwide convention with franchisees. We remain on track for G&A to be about 2.2% of system-wide sales for the full year. Chris and I are focused on managing our enterprise cost structure. We've made investments over the last couple of years to consolidate and upgrade our global systems and processes, with a clear goal of delivering future efficiency. In 2027, we expect that we'll begin to see the benefits from those investments as we seek to lower G&A percentage spend. As we mentioned last quarter, in relation to margin performance at our U.S. company-operated restaurants, we continue to evaluate the optimal franchisee versus company ownership balance to maximize system value. As part of this ongoing work across both the U.S. and international markets, we expect incremental company-owned restaurant divestitures, some of which occurred in the second quarter to continue in 2026 and beyond. We'll provide more details on our refranchising efforts and our G&A outlook during our Investor Day in September. We continue to be highly disciplined allocators of capital towards new restaurants based on our ability to generate attractive returns. We've completed our new restaurant pipeline analysis that Chris and I spoke about last quarter. Due to the current pressured consumer environment, coupled with the cumulative inflationary impact on development costs, we now expect to reach 50,000 restaurants globally in 2028. That's a slight adjustment to our previous plans to reach that level by the end of 2027. Yet, even with this change, this continues to be the fastest period of restaurant growth in McDonald's history, and we remain on track to open about 2,600 gross restaurants by the end of this year. As we look ahead, Chris and I remain very confident about our pathway to enhancing shareholder value. We have both led large parts of the operating business in prior roles and have demonstrated the ability to proactively address and solve issues to drive strong performance. That's exactly what we're working together to accomplish in the coming quarters. And with that, let me turn it back over to Chris.”