Arcos Dorados Reports Strong 2-Year Comparable Sales for the Fourth Quarter 2021 and Provides Guidance for 2022 To 2024
Systemwide comparable sales grew 24.2% on a 2-year basis in the fourth quarter of 2021
Adjusted EBITDA in the fourth quarter of 2021 surpassed the previous quarterly record established in the fourth quarter of 2019
Capital expenditures of $650 million and record number of free-standing unit openings planned for the 2022 to 2024 growth cycle
Potential to open around 1,000 new restaurants in the next 10 years
Arcos Dorados Holdings, Inc. (NYSE: ARCO), Latin America’s largest restaurant chain and the world’s largest independent McDonald’s franchisee, today reported its systemwide comparable sales results for the fourth quarter and full year ended December 31, 2021, ahead of its quarterly earnings announcement planned for March 16, 2022. The Company also provided guidance for restaurant openings, modernizations and total capital expenditures for 2022 to 2024.
“We are very pleased with our performance in 2021 and are particularly encouraged by the positive trends in both sales and profitability during the second semester of the year. In fact, based on preliminary results, fourth quarter Adjusted EBITDA surpassed the previous quarterly record established in 2019. The momentum we built over the course of the year was powered by our Three D’s strategy of Drive-thru, Delivery and Digital, which maximized the structural competitive advantages of our restaurant footprint and brand positioning,” said Marcelo Rabach, Arcos Dorados’ Chief Executive Officer.
“We begin the 2022 to 2024 growth cycle excited about the direction of the business. We plan to open the highest-ever three-year total of free-standing locations, re-accelerate restaurant modernizations and further expand our Digital leadership. These investments, combined with normalized cash flow generation and a very strong balance sheet, will ensure Arcos Dorados is positioned to capture the full potential of the McDonald’s brand in Latin America and the Caribbean in the years ahead.”
1excluding Venezuela. Adjusted EBITDA refers to unaudited, estimated result as of the time of this press release
2-year Systemwide Comparable Sales – 2021 versus 2019
|
Increase / (Decrease) |
|||||
|
1Q21 |
2Q21 |
3Q21 |
4Q21 |
FY 2021 |
|
| Brazil |
(15.5)% |
(10.6)% |
0.7% |
5.7% |
(4.6)% |
| NOLAD |
0.3% |
6.5% |
10.9% |
15.0% |
8.4% |
| SLAD, excl. Venezuela |
28.8% |
13.7% |
54.5% |
80.8% |
43.6% |
| Total, excl. Venezuela |
(0.8)% |
(0.6)% |
16.5% |
24.2% |
10.1% |
| Venezuela is excluded due to the heavy distortions caused by its macroeconomic volatility, including its current hyperinflationary environment and heavily regulated currency. | |||||
Systemwide comparable sales growth on a 2-year basis gained momentum during the fourth quarter of 2021, even compared with the strong results in the 2019 quarter.
Brazil’s seasonal sales growth normalized in the quarter, culminating in more than 1.0 billion reais in gross sales in December, a record month for the Division. NOLAD benefitted mainly from steady, strong sales growth in Mexico and Puerto Rico. Sustained growth in the quarter drove sales well above inflation in nearly all SLAD markets, especially Argentina, Chile and Colombia. Chile’s 2-year performance also reflects the comparison with weaker results caused by the social unrest in the fourth quarter of 2019.
The Company combined its unmatched free-standing restaurant portfolio, strong Brand positioning and Three D’s strategy, to take advantage of increased consumer mobility and accelerate sales growth in all Divisions.
2022 to 2024 Outlook
Openings and Modernizations
The Company expects to open at least 55 new restaurants in 2022 and 200 or more locations from 2022 to 2024.
The number of free-standing restaurant openings will be about twice the number opened during the most recent, pre-pandemic growth cycle (2017-2019) and the most for a three-year cycle in the Company’s history.
Arcos Dorados expects approximately 60% of gross openings from 2022 to 2024 to be in Brazil. Plans are for Chile, Panama and Costa Rica to account for the next largest number of openings in the period. The Company also expects to modernize around 400 restaurants from 2022 to 2024.
Capital Expenditures
For 2022, the Company expects total capital expenditures to be between $180 and $200 million, which will be fully-funded with cash on hand and cash generated from operations. The total capital expenditures plan for 2022 to 2024 is about $650 million. Capital expenditures will focus on openings, modernizations, maintenance and digital capabilities.
McDonald’s – Growth Support
McDonald’s has agreed to continue providing the Company with Growth Support, which is expected to lower the consolidated effective royalty rate to about 5.6% of sales in 2022 and 6.0% of sales in both 2023 and 2024.
Capital Structure
The Company expects to report a Net Debt to Adjusted EBITDA ratio below 2.0x and to be in full compliance with all its debt covenants as of year-end 2021.
On December 10, 2021, the Company renewed its $25 million revolving credit facility with JPMorgan through December 12, 2022. The credit facility has an interest rate of SOFR + 3.1%.