Arcos Dorados (NYSE:ARCO), the largest independent McDonald’s franchisee, saw its shares drop over 13% intra-day today after posting first-quarter earnings that missed expectations, even as revenue and comparable sales remained strong.
The company reported earnings of $0.07 per share, falling well short of the $0.15 consensus. Revenue, however, exceeded forecasts, rising to $1.1 billion versus expectations of $1.05 billion.
Comparable sales grew 11.1% year-over-year, keeping pace with regional inflation and highlighting resilient consumer demand. But profitability took a hit—adjusted EBITDA dropped 16.2% to $91.3 million, and the EBITDA margin declined to 8.5% from 10.1% a year earlier.
Digital channels continued to gain traction, with digital sales rising 6.3% and representing nearly 60% of total systemwide sales. The company’s loyalty program also expanded, reaching 18.8 million registered members across five key markets by the end of the quarter.
While top-line momentum remains intact, the decline in margins and earnings has raised concerns about cost pressures and profitability going forward.