Arcos Dorados Holdings Inc (ARCO) Q1 2025 Earnings Call Highlights: Navigating Challenges with ...

GuruFocus News

Thu, May 15, 2025, 4:01 PM 4 min read

Release Date: May 14, 2025

For the implicit transcript of the net call, delight notation to the full net telephone transcript.

• Arcos Dorados Holdings Inc (NYSE:ARCO) reported full gross of $1.1 billion, maintaining levels from the erstwhile twelvemonth contempt challenging conditions.

• Digital income accounted for astir 60% of system-wide income successful the archetypal quarter, with notable spot successful loyalty programs and mobile bid and pay.

• The institution saw a beardown rebound successful Argentina, contributing to a 38.7% emergence successful comparable income successful the SLAT division.

• Arcos Dorados Holdings Inc (NYSE:ARCO) has a robust selling program for the remainder of the year, which is expected to amended income performance.

• The institution has a beardown equilibrium expanse with an investment-grade standing from Fitch and nary worldly indebtedness maturities until 2029.

• First 4th consolidated adjusted EBITDA was $91.3 million, down from the erstwhile twelvemonth owed to weaker section currencies and borderline unit successful Brazil.

• Brazil's borderline contraction was chiefly owed to higher nutrient and insubstantial costs from rising beef prices.

• The QSR manufacture successful Brazil and NOLAD experienced reduced traffic, attributed to little user purchasing power.

• The institution faced important headwinds from calendar effects, including Leap Day and Holy Week, impacting income comparisons.

• There was a diminution successful first-quarter EBITDA borderline owed to higher food, paper, occupancy, and different expenses arsenic a percent of revenue.

• Warning! GuruFocus has detected 3 Warning Sign with ARCO.

Q: Could you remark connected income trends successful the aboriginal 2nd 4th of 2025, particularly successful Brazil and NOLAD, nether a much normalized 4th successful presumption of calendar effects? How overmuch of the anemic comparable income successful the archetypal 4th is attributable to antagonistic calendar effects versus a weaker depletion environment? A: (Marcelo Raba, CEO) In NOLAD, peculiarly Mexico, Panama, and Costa Rica, we faced reduced postulation successful the QSR manufacture owed to calendar effects similar Holy Week. However, April showed beardown performance, particularly successful Mexico, which is simply a important marketplace for us. We spot a affirmative outlook for NOLAD successful the coming quarters. (Luisagannao, COO) In Brazil, the calendar interaction was significant, but the QSR visits were down owed to little user purchasing power. We remained cautious with pricing, but transportation performed strongly. We expect improved show arsenic the twelvemonth progresses.

Q: How does the institution spot contention passing higher beef prices into prices, and erstwhile should we commencement seeing a betterment successful margins successful Brazil? A: (Mariana Tannenbaum, CFO) During the archetypal quarter, we faced accrued beef prices successful Brazil, impacting margins. We expect to stabilize gross margins done pricing strategies, supplier negotiations, and gross absorption initiatives. We expect margins for 2025 to beryllium akin to 2024, excluding past year's payroll disbursal reversals and credits successful Brazil.