Arcos Dorados Reports Strong Comparable Sales for the Fourth Quarter 2022 and Provides Guidance For 2023
Systemwide comparable sales (*1) grew 35.7% in the fourth quarter of 2022 and revenue surpassed $1.0 billion for the first time in a single quarter
Adjusted EBITDA in the fourth quarter of 2022 surpassed the previous quarterly record established in the fourth quarter of 2021
Arcos Dorados opened 66 restaurants in 2022 and expects to open 75 to 80 restaurants in 2023, with around 90% of openings in both years being free-standing units
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, 2022, ahead of its quarterly earnings announcement planned for March 15, 2023. The Company also provided guidance for restaurant openings, modernizations and total capital expenditures for 2023.
“The Three D’s strategy of Digital, Delivery and Drive-thru, combined with increasing on-premise restaurant traffic, kept sales growth strong throughout 2022 in all divisions. With expanding Digital functionality and the largest free-standing restaurant portfolio in the industry, our guests are able to choose what, when, where and how they want to enjoy their McDonald’s experience. Our market research shows we gained significant market share, especially in Delivery and Drive-thru, widening the gap with our nearest competitors across the region in 2022. Comparable sales rose from two to more than three times blended inflation last year, in all divisions. This real sales growth helped generate operating leverage and higher Adjusted EBITDA. Based on preliminary results, Adjusted EBITDA in US dollars in the fourth quarter surpassed the previous quarterly record established in 2021,” said Marcelo Rabach, Arcos Dorados’ Chief Executive Officer.
“We executed our openings and modernization plans for 2022, exceeding guidance for both while focusing openings on free-standing units. This structural competitive advantage was made stronger, as we opened far more free-standing units than any other restaurant operator in the region. We have a robust openings pipeline for 2023 and continue to believe we can open at least 1,000 McDonald’s restaurants in our footprint over the next ten years.”
| 1 | Excluding Venezuela. Adjusted EBITDA refers to unaudited, estimated result as of the time of this press release. |
Systemwide Comparable Sales Growth
| Increase / (Decrease) | |||||
| vs. the prior year period | 1Q22 | 2Q22 | 3Q22 | 4Q22 | FY 2022 |
| Brazil | 39.0% | 37.4% | 21.8% | 21.9% | 28.8% |
| NOLAD | 24.1% | 20.9% | 18.2% | 19.6% | 20.6% |
| SLAD, excl. Venezuela | 64.3% | 98.8% | 67.8% | 70.7% | 74.2% |
| Total, excl. Venezuela | 42.0% | 47.9% | 34.2% | 35.7% | 39.4% |
| 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 versus the prior year remained strong in the fourth quarter and also improved sequentially.
Marketing campaigns, designed to generate excitement around the FIFA World Cup, were launched early in the quarter, driving record October sales and profitability. The Company leveraged its Digital platform to engage guests and leverage its competitive strengths in both Delivery and Drive-thru. Digital channels contributed 44% of sales in the quarter, including 52% in Brazil, boosted by the highest ever quarterly Delivery sales since the introduction of the service.
Profitability also remained strong, with preliminary results indicating record US dollar Adjusted EBITDA. The Company offset a challenging comparison with the prior year, which included $9.2 million of non-recurring items, and the impact of the final increase in the Company’s royalty rate.
2022 Actual and 2023 Guidance – Openings and Capital Expenditures
Openings and Modernizations
The Company opened 66 Experience of the Future (EOTF) restaurants in 2022, including 59 free-standing units. There were 40 openings in Brazil and a relatively even number of openings between NOLAD and SLAD. The Company also modernized more than 110 existing restaurants to the EOTF format.
For 2023, the Company expects to open 75 to 80 EOTF restaurants and modernize around 250 existing restaurants to the EOTF format. Similar to 2022, about 60% of gross openings in 2023 are expected to be in Brazil.
Capital Expenditures
Total capital expenditures in 2022 were approximately $220 million, including all openings, modernizations, optimizations and maintenance in the restaurant portfolio as well as the Company’s investments in its Digital platform and back-office systems.
For 2023, the Company expects total capital expenditures to be around $350 million, which will be fully funded with cash on hand and cash generated from operations.
McDonald’s – Growth Support
As previously disclosed, McDonald’s agreed to continue providing the Company with Growth Support, which is expected to lower the consolidated effective royalty rate to around 6.0% of sales in both 2023 and 2024.
About Arcos Dorados
Arcos Dorados is the world’s largest independent McDonald’s franchisee, operating the largest quick service restaurant chain in Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories with more than 2,300 restaurants, operated by the Company or by its sub-franchisees, that together employ over 90 thousand people (as of 12/31/2022). The Company is also committed to the development of the communities in which it operates, to providing young people their first formal job opportunities and to utilize its Recipe for the Future to achieve a positive environmental impact. Arcos Dorados is listed for trading on the New York Stock Exchange (NYSE: ARCO).
