Release Date: March 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arcos Dorados Holdings Inc (ARCO, Financial) achieved a record adjusted EBITDA of $500 million for the full year 2024, marking the highest in the company's history.
- The company reported strong digital sales growth, with fully digital sales increasing by 18% in US dollars compared to 2023.
- The loyalty program added 12.6 million new members in 2024, ending the year with 15.8 million registered members, driving higher guest frequency and check growth.
- Arcos Dorados Holdings Inc (ARCO) maintained a strong balance sheet with a healthy leverage ratio and no significant debt maturities in the next four years.
- The company achieved a high EOTF (Experience of the Future) restaurant penetration, reaching 67% of the total footprint, with plans to increase this to 90% by 2027.
Negative Points
- The depreciation of key currencies like the Brazilian real and Mexican peso negatively impacted US dollar revenue growth.
- Macroeconomic challenges in regions like NOLAD and SLAD led to tighter margins despite overall positive performance.
- Food and paper costs pressures, particularly from beef costs in Brazil, are expected to continue impacting margins.
- The company faces consumption slowdowns in key markets like Brazil due to currency concerns and inflation.
- Despite strong digital sales, the company still faces challenges in increasing EOTF penetration in regions like NOLAD, which currently has the lowest penetration among the divisions.
Q & A Highlights
Q: Can you provide an update on the ROI for new freestanding stores built over the last few years?
A: Mariano Tannenbaum, CFO: We target a 20% first-year return on investments for new openings. In recent years, we have maintained or exceeded this historical average, and we will continue to follow a disciplined opening process to sustain these strong returns.
Q: How are sales trending in the first quarter across markets?
A: Marcelo Rabach, CEO: We expect comparable sales growth to be at or above inflation for 2025 in most markets. However, the first quarter may be a low point due to factors like leap year comparisons, weak currency levels, and geopolitical uncertainties, particularly in Mexico. We anticipate conditions to improve as the year progresses.
Q: Are you seeing any impact from anti-US sentiment, particularly in Mexico?
A: Marcelo Rabach, CEO: Not really. McDonald's is a beloved brand in Latin America, and we have strong brand reputation scores in Mexico. Our localized marketing and community engagement have positively impacted our brand perception.
Q: What are your expectations for food and paper costs this year, and where do you see potential offsets?
A: Mariano Tannenbaum, CFO: The main pressure is from beef costs in Brazil. We are managing this through menu pricing and supplier negotiations. We are not seeing similar pressures in other divisions, which helps offset the impact. Our scale and negotiation power with suppliers are additional strengths.
Q: How is traffic in Argentina evolving, and is the lower by tax a factor there?
A: Marcelo Rabach, CEO: Consumption was down for most of 2024 but recovered strongly by year-end. We gained market share and improved brand attributes. The lower by tax is not a significant factor; improvements are due to sales recovery and operational efficiencies.
Q: What is driving SLAD market expansion?
A: Marcelo Rabach, CEO: Argentina's recovery is a factor, but Chile, Colombia, and Uruguay also showed strong results in Q4 2024, and we expect continued strong performance from these markets.
Q: How does Arco's digital strategy compare to its competitors?
A: Luis Raganato, COO: We are leaders in digitalization, which is core to our strategy. It drives operational efficiencies and customer engagement. We believe this is just the beginning and will continue to contribute to sales growth and profitability.
Q: Could you share some color on how comp sales breakdown between traffic and ticket in Brazil?
A: Marcelo Rabach, CEO: For the year, both traffic and check growth contributed to comparable sales in Brazil. In Q4, check growth was flat with guest counts. We are closely monitoring the consumer environment to continue gaining market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
