Despite weakness in the U.S.,
) posted better-than-expected comparable sales (comps) for the
month of Jan 2014. At its fourth quarter earnings call, the
company guided flat year over year comps for the month of
January. However, comps increased 1.2% in the month. The increase
was much better than a decline of 1.9% in the year-ago period.
The improved comps reflect solid performance in the international
markets (Europe and Asia/Pacific, Middle East and Africa
(APMEA)), partially offset by a poor performance in the U.S.
BURGER KING WWD (BKW): Free Stock Analysis
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Comps in the domestic market proved to be a weak link for the
company. Comps fell 3.3% in January compared to an increase of
1.9% in the year-ago period. The dismal performance was
attributed to inclement weather conditions that stopped customers
from venturing outside. Moreover, U.S. customers continued to
spend cautiously. As per Edward Jones & Co., consumers paid
credit card bills for their Christmas spending, and therefore
were not willing to dine out.
In order to regain momentum and attract diners, McDonald's pinned
its hopes on the revamped Dollar Menu comprising burgers that
were priced more than a dollar. It was designed to boost the
company's profits without pushing away customers who were
accustomed with paying a dollar for different items.
However, it is yet to find favor with diners.
Moreover, the company introduced healthy and fresh menu items,
like chicken wraps and breakfast sandwiches made with egg whites.
However, these initiatives are yet to reap benefits. As per a
regulatory filing, the company's customer traffic at established
locations declined 1.6% in the U.S. in 2013.
Like McDonald's other restaurant chains like
Burger King Worldwide Inc.
The Wendy's Company
) are also busy introducing new items and achieving operational
excellence in order to improve traffic trends.
Despite the challenging macroeconomic conditions, the region
reported comps growth of 2.0%, much better than a decline of 2.1%
in the year-ago month. The improved results reflect strong
performance in the U.K. and France. Particularly, new drink
offerings in the U.K and less-expensive snacks in France led to
the positive performance in Europe. However, these results were
partially offset by a weak performance in Germany.
Asia/Pacific, Middle East and Africa (APMEA)
After posting a decline of 9.5% in the year-ago month, comps in
the region were up 5.4% in January.
The significant improvement reflects solid results in China due
to a shift in timing of the Chinese New Year. It also seems that
consumer sensitivity related to the prior year supply chain issue
in the chicken industry is almost over. Solid results in other
markets like Japan and Australia also contributed to overall
It seems that the company is trying to offset weakness in the
domestic market with growth in overseas markets. A perfect
example of this is the opening of its first restaurant in the
largely untapped market of Vietnam. According to data from market
research firm Euromonitor International, Vietnam's fast-food
industry is small but growing rapidly.
However, one cannot ignore the weakness in the U.S. economy,
which is affecting consumer confidence. McDonald's presently has
a Zacks Rank #4 (Sell).
Fiesta Restaurant Group, Inc.
) is a better-ranked stock in the same sector with a Zacks Rank
#1 (Strong Buy).