MCD is scheduled to report its May same-store sales results next week on Monday, June 9th, and based on the current environment combined with more difficult comparisons in the offing, I would not be surprised to see same-store sales results soften.
- U.S. - Continues to struggleI have been saying for some time now that U.S. sales results could lose some momentum in 2008 due to the absence of any real incremental sales layers being introduced into the system. The specialty coffee launch, which although it is receiving much media attention now, is more of a late 2009 event and, I think, may even be pushed out further.
Looking at the chart, it is clear that 2-year trends are coming down (outside of February which included a 4% benefit from an extra day due to leap year). MCD's U.S. segment is facing its most difficult comparison year-to-date in May (up 7.4% last year). In March, when the company was lapping its second toughest comparison year-to-date of up 6.2%, it posted a negative same-store sales number (down 0.8%).
- Europe - Starting to follow U.S.'s lead Although MCD's same-store results in Europe have been consistently strong (primarily up in the 5%-plus range), 2-year trends have come down rather significantly in the last couple of months. Based on the Eurozone Retail Sales report released last night that showed European retail sales declined 2.9% in April, more than three times as much as economists forecast, as soaring fuel and food prices undermined consumer spending (and other signs of slowing consumer spending in Europe - refer to my News from Europe post from 5/30), MCD's 2-year European same-store sales trends could get worse before they get better.
Although MCD typically outperforms other restaurant companies in a tough consumer environment as people trade down , no company is completely immune (as we have seen even with MCD in the U.S.). Making matters worse, the company is facing more difficult comparisons in May and June (up 8.9% and 11.1% last year, respectively). It is important to note that Europe represented 38% of MCD's consolidated 2007 operating income
- APMEA - How far behind is Asia?Although APMEA's same-store sales trends look great with comparable sales consistently up 8%-plus, the year-over-year comparisons only get more difficult going forward in 2008. Add to that our view that growth is slowing in Asia (please refer to Keith McCullough's portal for his views on that), and MCD could face declining trends in each of its three major geographic segments.