MCD Black Book Call Tomorrow
Please note we have moved the MCD Black Book to June 14th @ 10 AM
CALL DETAILS:
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MCDONALDS (MCD) LONG THESIS:
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CLASSIC #QUAD4 STOCK: Given McDonald's orientation towards a value proposition, sales are likely to benefit from trading down, while also being impacted by the macro economy. McDonald's is a strong Quad 4 stock and is currently well-positioned with solid execution around very sound fundamentals. Its core value-oriented customers are caught in an inflationary spiral that may require the company to pivot towards a more price value stance with some of the iconic brands, which has worked well during previous difficult periods.
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DIGITALLY ENABLED GROWTH: MCD has been working hard over the past five years to become digitally enabled. Currently, MCD is seeing a 25% digital mix and is supported by discount promotions & daily deals to drive sales in this channel. MCD launched its loyalty program in July 2021 and saw 30 million members in the first six months. Currently, Sensor tower is showing 69MM active users, growing 7% YoY. Digital and loyalty represent its most significant digital driver over time.
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CURRENTLY BEST IN CLASS MARKETING: Depending on how you measure it, MCD spends over $1.5 billion on media, far surpassing its next closest competitor. Current marketing focuses on accentuating taste, affordability, family & brand trust, and repositioning has resulted in a better, slightly different brand perception over the last several years.
Knapp Track May
MAY 2022 CASUAL DINING ESTIMATES USING THE COMPARISON 2022 VS. 2021
COMPARABLE SALES COMPARABLE GUEST COUNTS
USA 5.6% - 0.9%
CALIFORNIA 14.2% 6.7%
TEXAS 3.5% -2.9%
FLORIDA 5.3% -1.3%
"At a USA level, the run rate for comparable sales for the first 2 weeks of MAY 2022 is 7.2%. At a USA level, the run rate for comparable sales for the last two weeks of MAY 2022 is 3.8%. The run rate for comparable guest counts for the first two weeks of MAY 2022 is 0.6% at a USA level. At a USA level, the run rate for comparable guest counts for the last two weeks of MAY 2022 is -2.4%"
CASUAL DINING WEEKLY USA LEVEL DATA
COMP SALES COMP GUEST COUNTS
Week ending MAY 08 7.6% 1.7%
Week ending MAY 15 6.0% -0.6%
Week ending MAY 22 5.3% -1.1%
Week ending MAY 29 2.3% -3.7%
MONTH OF MAY 2022 5.6% -0.9%
USFD Unions Problems
USFD is a SHORT
A union representing workers in the eastern warehouses of distributor U.S.Foods are threatening a mass walkout amid efforts to hammer out new labor contracts.
"We aren't going to be afraid to strike," Sean O'Brien, president of the International Brotherhood of Teamsters, said in a statement. A work stoppage would undoubtedly add another complication to UU.S.Foods' efforts to supply restaurants on the East Coast. Across all distributors, a seemingly ever-changing list of suppliers has been difficult to get, resulting in manufacturers cutting production because of labor and ingredient shortages. Distributors are grappling with the additional challenge of finding enough truck drivers to keep their fleets in motion. A walkout by warehouse workers, and a possible observance of the strike by sympathetic truck drivers, would be additional significant kinks in the pipeline. "Although we remain confident in our ability to reach an agreement at the bargaining table, we have contingency plans to help manage potential disruptions and continue serving our valued customers," a UU.S.Foods spokesperson told Restaurant Business. In addition, successfully negotiating the various contracts in play would not necessarily avert the potential headaches for operators. Increases in pay rates and benefits would raise U.S.Foods expenses at a time when galloping food costs and inflation, in general, are already emerging as top concerns for restaurants.
SHAK Unit growth Issues
SHAK is a SHORT - Shake Shack started the year saying it planned to open up to 50 new restaurants.
But delays are jamming up the chain's new unit pipeline, a channel it depends on for sales growth and management compensation. "It's not that we don't have the pipeline. It's actually incredibly frustrating because we do have the pipeline," Shake Shack CFO Katherine Fogerty. The chain is now saying it plans to open 40 to 45 new restaurants this year, with many openings back weighted to the fourth quarter and some new units pushed to 2023. Shake Shack opened seven new locations in the first quarter. It currently has more than 380 global restaurants, with 225 company-operated UU.S.stores. The CFO said the company intends to open six new restaurants in the second quarter and 9-11in 3Q22. Under that cadence, it would need to open an amazing 16 new locations in the fourth quarter to make even the low end of its revised development goal. Its licensed partners are expected to open 23 to 27 new units in 2022. SHAK said last month that it expects build-out costs to rise 10% to 15% because of inflation and the higher cost of drive-thrus and that a full return to office is still far away in most major cities, and international tourism has yet to bounce back. The chain has raised its menu prices by about 7% in the last six months, and it now imposes a 15% premium on third-party delivery orders.
Among the reasons for the unit slowdown:
- Construction delays
- Permitting delays
- Lack of workers at the chain's internet service provider to install Wi-Fi
- Trouble getting parts and restaurant equipment
Shake Shack has yet to provide unit growth guidance beyond 2022. SHAK slowed growth during the pandemic, more so than many other brands, because of its extensive portfolio of urban stores, which COVID heavily impacted. Since then, the chain has started opening more suburban locations, and it now has its first five drive-thrus in operation. It has said it intends to end the year with ten drive-thrus.
