Why Is McDonald's Franchisee Arcos Dorados Stock Falling On Wednesday?

Arcos Dorados Holdings Inc. ARCO shares are trading lower on Wednesday after the company reported first-quarter results. Arcos Dorados Holdings is the master franchise of the fast food restaurant chain McDonald’s in 20 countries and territories across Latin America and the Caribbean.

Arcos reported earnings per share of 7 cents, missing the Street view of 13 cents. Quarterly sales of $1.08 billion (flat year-over-year) outpaced the analyst consensus estimate of $1.05 billion.

Total revenues grew 14.1% in constant currency, supported by 11.1% higher systemwide comparable sales.

Digital sales rose 6.3% in the period, helped by close to 19 million monthly average users of the mobile app. Digital channels generated almost 60% of systemwide sales in the quarter.

Also Read: McDonald’s Launches Massive Summer Hiring Drive For 375,000 Workers Amid US Expansion Plans And Slumping Sales

Adjusted EBITDA for the quarter slumped 16.2% on a year-over-year basis to $91.3 million in the quarter under review. Adjusted EBITDA margin contracted to 8.5% from 10.1%.

The Loyalty Program reached 18.8 million registered members at the end of the quarter, supporting increased frequency and higher average check in available markets.

Consolidated profitability declined compared to last year due mainly to weaker local currencies and margin pressures in Brazil.

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The net income margin attributable to the company was 1.3%, or 130 basis points lower, versus the first quarter of 2024. 

“Even as consumers pulled back on eating out of home during the quarter, off-premise channels remained resilient, generating about 43% of total systemwide sales in the quarter,” said CEO Marcelo Rabach.

Arcos Dorados added 12 new EOTF restaurants to the company’s footprint, including 10 free-standing units, in the first quarter of 2025.

The company said it plans to accelerate the pace of openings as the year progresses to meet its full-year guidance of 90 to 100 new restaurants.

Price Action: ARCO shares are trading lower by 6.13% to $7.660 at last check Wednesday.

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