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MCD: Same-store sales trends continue to surprise me

MCD posted another strong month of comparables sales, with August 2-year trends improving sequentially from July in every segment. U.S. same-store sales were up 4.5%. Despite the strong top-line trends, I continue to be concerned about U.S. restaurants margins (which have declined for the last 6 quarters) as the company drives increased traffic with its Dollar Menu, but the August number was impressive nonetheless.
  • August same-store sales grew 11.6% and 10% in Europe and APMEA, respectively. Even with this continued top-line momentum, one of my ongoing concerns stems from the company’s increasing foreign currency benefit, which will not be around forever. As I have said in the past, MCD Europe’s positive currency impact has grown rather steadily and has been beneficial to EBIT growth since 3Q06. Reported systemwide sales in Europe grew 21.5% in August, including an 8% currency benefit. This currency impact, although still significant, slowed from July when currency boosted systemwide sales growth by 13%. In APMEA, currency helped total sales growth by 6% in August (down from nearly 10% in July). Based on these results, MCD will still experience currency tailwinds in 3Q08, but we may have already seen the peak of the currency benefit.

DIN – THE CFO’S IS TAKING THE FALL FOR THE CEO’S MISTAKES!

Julia Stewart’s acquisition of the Applebee’s chain will go down as one of the worst acquisition in the history of the Restaurant Industry. At the time of the acquisition the stock was $65, today its below $20 and going lower.

Today, DIN announced that resignation of Thomas G. Conforti, its Chief Financial Officer, effective immediately. In the press release, Julia Stewart went to praise him for his service to the firm. Yet, taking a closer look that the 8K shows that he was more likely fired and did not resign.

Item (d) in the separation agreement states that;
The Company shall make available to Executive for a period of up to 18 months following the Effective Date, at the Company’s expense, executive-level outplacement assistance benefits through Right Management or another outplacement firm of Executive’s choice, provided that such benefits shall be capped at $12,000.00 and will be paid by the Company directly to the provider.

In the normal course of resigning voluntarily from a job you don’t get out-placement services!

Swedish Fish, This Chart Is Not...

This is just another picture that reflects the massively relevant impact of global growth slowing in the face of a US Dollar appreciating.

Sweden’s economy is tied to commodities and global infrastructure – the WEF ranks them as the 4th most competitive economy. Yes, the Swedish Krona looks like it had quite a run alongside those 2 global investment "themes" since 2005 doesn't it!

Local CPI was reported today, a touch better than expectations. This stagflation tastes nothing like Swedish Fish.
KM

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VIX and S&P500 quant setups look ominous here...

In the immediate term, my models have the Volatility (VIX) level testing 24.77, and the S&P500 headed to 1230.54.

This is the immediate term "Trade" as I see it right now. Remember, my price models reset every 90 minutes. As the facts change, I will.
KM
(picture courtesy of: http://www.robertcasumbal.com/blog/images/080207_bearish_beat_bullish_450px.jpg)
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Portfolio Strategy: I've Moved Back to 84% Cash

Sell High. Buy Low. This market is one to be rented, not owned.
KM

Americans Have Not Marked Their Homes To Market, Yet...

June's lift in home sales looks like it was short lived. This morning's "Pending Home Sales" for the month of July came in at -3.2% vs. -1.5% expected. Unless homeowners mark their sale prices to market, they are going to be stuck with "marked to model" liabilities, much like Dick Fuld at Lehman is.

There are plenty of hedge fund managers pinging me that "housing has bottomed"... I definitely missed this "Trade" higher in the US Homebuilding stocks, but I am certainly not going to mistake my missing it for a "Trend".

Be careful chasing momentum stocks out there. They are starting to come down faster than they went up (see GOOG, POT, etc...).
KM

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