) restaurants in Moscow were reportedly shut down at the order of a
Russian consumer-safety agency, Rospotrebnadzor, on account of
multiple violations of sanitary rules. The agency suspects that
cheese suppliers of this hamburger chain use antibiotics and that
the menu information provided by the company with regard to
nutrition is inaccurate. The closings include the first McDonald's
location that was opened in Russia - the largest in the country -
near Pushkin Square.
Some analysts believe that this decision comes in the wake of high
tensions between Moscow and Washington. They believe that it is the
result of the restrictions imposed by the U.S. on Russia that hit
the nation's largest oil producer Rosneft and other energy,
financial and defense firms. These regulations would primarily
restrict Russian giants' access into the U.S markets.
In fact, it was apparent from last month's lawsuit that McDonald's
was under heightened scrutiny by the Russian state. In July, the
Russian consumer protection agency had filed a lawsuit against the
company in Moscow court stating that its food items contain more
fat and carbohydrates than the permissible standards in Russia.
Will Russia & China Issues Weigh on McDonald's
Meanwhile, earlier this month, Russia banned all meat, fish, dairy,
fruit and vegetable imports from the United States, the European
Union, Norway, Canada and Australia for one year in response to the
sanctions imposed by these countries over Ukraine. However, some of
these restrictions were eased later.
We note McDonald's has been facing one issue after another for
quite some time now. In July, Shanghai Husi Food Co., a supplier of
meat for McDonald's, was found reusing meat that had fallen on the
factory floor as well as mixing fresh and expired meat. This
incident incurred the wrath of food regulators. The company
reportedly apologized and announced a change in meat suppliers.
We believe that this latest setback could adversely impact
McDonald's international sales especially at a time when its
comparable sales in the U.S. are suffering due to declining
consumer spending in a sluggishly recovering economy.
McDonald's has a Zacks Rank #4 (Sell). Better-ranked stocks in the
same industry include BJ's Restaurants, Inc. (
), Chipotle Mexican Grill, Inc. (
) and Jamba, Inc. (
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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