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Takeaway: Global sales surprise, but U.S. sales disappoint. We remain bearish on MCD.

This note was originally published September 10, 2013 at 13:17 in Restaurants

MCD reported August global same-store sales growth of +1.9% versus +3.7% in 2012.  However, the two-year trend ticked up 245 bps sequentially.

MCD: Still Not Lovin' It - mcd2 

The U.S. and Europe regions showed same-store sales growth of +0.2% and +3.3%, respectively.  The U.S. missed consensus expectations by 60 bps, while Europe beat by 340 bps.  The two-year trends accelerated sequentially to +1.6% in the U.S. and +3.2% in Europe.  The APMEA region reported same-store sales growth of -0.5% versus +5.7% a year ago, beating consensus expectations by 40 bps.  The two-year trend accelerated sequentially to +2.6%.

Overall, August sales were slightly better than we had expected—but not enough to change our fundamental view.  Although Global sales were better than estimates, U.S. sales disappointed and remain a point of concern for us.  MCD continues to refer to the U.S. environment as “persistently challenging,” which, interestingly enough mirrors the chatter we have been hearing from a majority of the larger casual dining companies more so than that of other QSRs.

Despite a flurry of recent initiatives regarding new items and menu changes propelling the stock higher, we remain comfortable with our thesis.  In fact, we’ve had a rather bearish take on this news, as we believe these initiatives could add to the operational complexities of McDonald’s stores.  Please see our recent note “MCD: A Pending Mighty Disaster” for more thoughts on this topic.

We continue to believe there is a disconnect between investors’ expectations and the company’s fundamentals.  MCD will present tomorrow morning at the Goldman Sachs Global Retailing Conference.  We’ll post on anything incremental following the presentation.

MCD: Still Not Lovin' It - penney1


MCD: Still Not Lovin' It - MCD Sales Note

Howard Penney

Managing Director