) comps grew 1.2% for the month of April, in line with management's
expectation of modestly positive comparable sales (comps) provided
during the first quarter earnings call. The increase was much
better than a decline of 0.6% in the year-ago period. The improved
comps reflect a good show in international markets, partially
offset by a sluggish performance in the U.S.
Comps in the domestic market remained flat year over year, which
compared unfavorably with an increase of 0.7% in the year-ago
period owing to difficult economic conditions, marked by a sluggish
job environment and stiff competition.
Moreover, the introduction of too many items over the past year has
complicated kitchen operations, thereby resulting in slower service
and inaccurate orders. This resulted in lower footfall.
Meanwhile, according to Investment Technology Group, fewer
customers visited McDonald's as its outlets offered very few items
valuing less than a dollar. The company had raised prices last year
by changing its "Dollar Menu" to the "Dollar Menu & More" in
The region had been posting year-over-year declines over the past
few months. However, flat comps this past month could be seen as a
turnaround driven by the company's focus on providing quality food
and outstanding service to its customers. McDonald's has a strong
breakfast lineup. Currently, the company is trying to boost
breakfast revenues by introducing variations of items already on
its menu instead of making new offerings. For a part of the month,
the company offered a free coffee promotion. Meanwhile, it
introduced new Clubhouse burgers and chicken sandwiches.
Like McDonald's other restaurant chains like
Burger King Worldwide Inc.
The Wendy's Company
Yum! Brands, Inc.
) are also busy introducing new items and achieving operational
excellence in order to improve traffic trends.
Comps in Europe were up 0.3%, better than the year-ago decline of
2.4%. Comps in Europe benefited from strong performances in U.K.
and France, which were largely offset by the ongoing weakness in
Germany. The company continued with its strong promotional
performance, menu innovations and growth at breakfast, which
contributed to the segment's results.
Asia/Pacific, Middle East and Africa (APMEA)
Comps at APMEA were up 2.9%, far better than the year-ago decline
of 2.9%. Strong results in China and Australia, mainly due to easy
year-over-year comparisons drove the results. This was partially
offset by the ongoing weakness in Japan.
International markets made up for the sluggish comps in the
domestic market, thereby leading to positive comps for the month.
At its first quarter earnings call, the company indicated that it
continues to see significant growth potential throughout APMEA. The
company intends to register growth in this region by increasing
restaurant visits, providing value, innovating new menu items,
re-imaging its restaurants and market campaigns. It seems that the
company is trying to offset weakness in the domestic market with
growth in overseas markets. However, one cannot ignore the weakness
in the U.S. economy, which is affecting consumer confidence.
McDonald's presently has a Zacks Rank #3 (Hold).
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