After relatively weak performances in the recent past and
a monthly decline in October, same-store sales (comps) at
) bounced back in November 2012.
McDonald's recorded growth of 2.4% in global comparable sales
(comps) in November 2012 as against a 1.8% decline in the
previous month. System-wide sales inched up 3.2% and 4.8% in
constant currencies in the month under review.
However, the Oak Brook, Illinois-based company witnessed a
downward movement in all its geographical segments on a yearly
basis. The fast-food restaurant chain had posted a substantial
increase of 7.4% in overall comps in the year-ago month. Apart
from the persistent global economic turmoil and peer pressure,
tough comparison led to the year-over-year decline in comps.
In the United States, comps advanced 2.5% compared with 6.5%
growth recorded in November 2011. Sustained focus on value menu,
breakfast offerings, strong beverage line-up and the limited time
offer for Cheddar Bacon Onion sandwiches pushed up the comps.
In Europe, comps grew 1.4% compared with an increase of 6.5%
in the year-ago period. Strong performances in UK, Russia and
some other markets were partially offset by a rather tepid show
Comparable sales nudged up 0.6% in Asia-Pacific, Middle East
and Africa (APMEA) as against a sizeable growth of 8.1% growth in
the year-ago month. Japan continues to be a dampener as the
country is still recovering from the aftermath of last year's
earthquake and consumers are dining out less frequently. However,
decent performances from Australia and some other markets have
partially balanced this weak performance.
The company is presently heavily dependent on value options,
variety in menu, locally relevant items as well as reimaging
programs to drive sales ahead.
Although the company is consistently striving to drive profits
amid a challenging macroeconomic environment by resorting to
value-proposition and gaining traction in coffee markets, it
continues to face tough competition from peers like
Yum! Brands Inc.
The Wendy's Co.
MCDONALDS CORP (MCD): Free Stock Analysis
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Further, the prospect of value proposition amid curtailed pricing
power and increased investments toward media can only restrain
profits. The company could not increase price this year as it did
last year. This has led to tougher comparisons.
At the end, we still believe that the company is heading the
right way. However, it needs to launch a few major offerings at
prices that are economically sensitive. McDonald's currently
retains a Zacks #4 Rank (short-term Sell rating). We maintain our
long-term Neutral recommendation on the stock.