) troubles with the Russian authorities continue. Reportedly, the
Russian courts upheld the temporary closure of the company's three
outlets in Moscow per the orders of Russian consumer-safety agency,
Rospotrebnadzor, on account of multiple violations of sanitary
rules. However, McDonald's reportedly announced that it would
appeal against the court ruling that ordered a minimum 90-day
shutdown of these Moscow restaurants.
Earlier this month, three Moscow restaurants were closed after
unplanned inspections by Rospotrebnadzor. The closings include
McDonald's' first Russian outlet - the largest in the country -
near Pushkin Square. The other two were located at Moscow's Manezh
Square and Prospect Mira, according to Reuters.
In fact, Rospotrebnadzor has downed shutters on a total of six
McDonald's outlets in Russia this month.
Some analysts believe that these closures come in the wake of
intense tension between Moscow and Washington. They are of the
opinion that restrictions imposed by the U.S. on Russia that hit
the nation's largest oil producer, Rosneft, and other energy,
financial and defense firms could have prompted these inspections
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 filed a lawsuit against the
restaurateur in a 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 Sales?) A hearing for this lawsuit was scheduled for Aug
13 which has now been postponed until Sep 11.
Meanwhile, earlier this month, Russia banned all meat, fish, dairy,
fruit and vegetable imports from the U.S., the European Union,
Norway, Canada and Australia for a year in response to the
sanctions imposed by these countries over Ukraine. However, some of
these restrictions were eased later.
We note that McDonald's has been facing a number of food-safety
issues for quite some time now. In July, Shanghai Husi Food Co., a
supplier of meat for McDonald's, was accused of reusing meat that
had fallen on the factory floor and mixing fresh and expired meat.
This incident enraged the food regulators, but the company
reportedly apologized and announced a change in meat suppliers.
We believe that this latest setback could adversely affect
McDonald's' international sales especially when constrained
consumer spending due to a sluggishly recovering U.S. economy is
affecting comparable sales in the country.
McDonald's has a Zacks Rank #3 (Hold). 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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