As outlined at the recent analyst meeting, McDonald’s will rely on beverages to drive top line sales in 2014.  As we’ve said before, we believe that allocating resources to selling more beverages, particularly hot espresso beverages, will not generate the incremental sales needed to achieve the current estimate of +1.7% same-store sales growth in the U.S. in 2014.


In our opinion, McDonald’s is a food first destination and whenever management shifts their focus away from food and to selling beverages, the core business suffers.  The shift in the marketing calendar for the remainder of 2013 is an early indication of where management plans to go.


It was recently reported that, after selling the highly successful McRib nationally for three years, McDonald’s is switching back to offering the sandwich on a regional basis.  Rather, McDonald’s will focus the balance of 2013 on selling Mighty Wings (a disaster), the Southwest Premium McWrap (hasn’t driven incremental traffic), and now White Chocolate and Peppermint Mocha specialty beverages.


This implies that management believes adding a premium espresso-based beverage to the menu will generate more incremental traffic than nationally promoting the McRib.  Although the McRib will be promoted locally, it will not have the full force of the McDonald’s marketing machine behind it in 2013.


We don’t expect MCD to report strong same-store sales for the balance of the year and well into 2014.  Looking back on 2013, MCD was forced to shift its strategy mid-year because new products and the promotional calendar were not resonating with consumers and, as it stands, all indications are for 2014 to be a repeat of 2013.




McDonald’s will report November same-store sales on 12/09.  We will post on anything incremental after the release.




Howard Penney

Managing Director


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more