After a dismal performance so far in the year,
) same-store sales (comps) increased in May as the world's
biggest burger chain witnessed positive comps growth in all three
geographical segments - U.S., Europe and Asia/Pacific, Middle
East and Africa (APMEA).
Among the three, the U.S. segment led the positive momentum.
Menu-innovations, value-options and breakfast offerings did the
trick across the globe. The recent upside came as a pleasant
surprise, although the rate of growth was lower than the year-ago
level in the U.S. and Europe. The persistent global economic
turmoil and peer pressure led to the year-over-year decline in
Global comps grew 2.6% in May 2013 as against 0.6% decline in
the previous month and 4.4% growth in the year-ago month.
System-wide sales were up 3.6% and 5.2% in constant currencies in
the month under review.
In the United States, comps advanced 2.4% compared with 4.4%
growth recorded in May 2012 and 0.7% growth in Apr 2013.
Sustained focus on value menu, solid breakfast offerings, and a
variety of chicken options bolstered the comps.
The new menu including Egg White Delight sandwich, which is a
healthy breakfast offering and the premium chicken McWraps
delighted consumers. Strategic expansion of its four pillars -
chicken, beef, breakfast and beverages helped the Oak Brook,
Ill.-based company drive sales.
In Europe, comps grew 2.0% compared to an increase of 2.9% in
the year-ago period and a decline of 2.4% last month. Strong
performances in UK and Russia were partially offset by a rather
tepid show in Germany and France.
Summer-time promotions featuring premium burgers and specialty
menu options in UK and Russia were the high points in the month.
Also, value messaging and the breakfast lineup enjoyed their
share of success.
Unlike U.S. and Europe, growth in APMEA was meager with just
0.9% increase. However, on a year-over-year basis, comps bounced
back from the last year's decline of 1.7% and last month's fall
of 2.9%. Decent performance in a number of markets offset the
avian flu-ridden weak Chinese performance. Japan was flat in the
month as the country is still recovering from the aftermath of
last year's earthquake with consumers dining out less frequently.
Although McDonald's has been faltering for quite some time now
due to fragile macro economy, changing eating habits and
cutthroat competition, we still believe that the company has
strong value. It is consistently striving to bounce back amid a
challenging macroeconomic environment by resorting to
value-proposition and menu innovation.
With two major regions including the U.S. and Europe gaining
considerable growth momentum, things are looking up for
McDonald's. The burger chain is also taking every required step
to score on profits as well. The recent elimination of the Angus
burgers from the U.S. menu in the wake of escalating beef prices
is such an attempt.
Currently carrying a Zacks Rank #4 (Sell), McDonald's is
slowly but steadily moving in a positive direction and might
breeze past investor expectation in its second quarter of 2013,
results of which are expected on Jul 22.
Other players in the restaurant industry, which look
attractive at current levels, include
The Wendy's Co.
The Cheesecake Factory Inc
Burger King Worldwide Inc.
), all carrying a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
CHEESECAKE FACT (CAKE): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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