McDonald's Closes 4 Moscow Outlets on Russian Agency Orders - Analyst Blog

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Four McDonald's Corp. 's ( MCD ) 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. (Read More: Will Russia & China Issues Weigh on McDonald's (MCD) Sales? ).

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. ( BJRI ), Chipotle Mexican Grill, Inc. ( CMG ) and Jamba, Inc. ( JMBA ). All these stocks sport a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MCD , CMG , BJRI , JMBA

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