$MCD | The Anatomy of a Monthly Sales Press Release!

Editor's Note: Below is a complimentary research note from Hedgeye Restaurant Sector Head Howard Penney published March 10, 2014 at 12:33 PM.  For more information on our services, click here.


$MCD | The Anatomy of a Monthly Sales Press Release! - unhappy meal istock


The following are quotes from Don Thompson taken directly from the monthly sales press releases.  Reading between the lines, the evolution of the language suggests that management still does not have a plan in place to improve same-store sales:


September – management not giving up

"We remain confident in the fundamental strength of the McDonald's System and our ability to connect with customers and deliver the menu choices, value and convenience they expect from McDonald's."


November – management not giving up

"We remain confident in the fundamental strength of the McDonald's System and our ability to drive initiatives that will deliver the greatest benefit for our customers."


December – management begins to waver, as they admit they need to make “investments”

"As consumer expectations and the marketplace continue to evolve, we are making investments in our menu, restaurants and service to strengthen our connection with customers and build our business for long-term profitable growth."


February – management is intent on improving performance

"We are intent on improving our performance by building on our customer-driven strategies and the fundamental strengths of our proven business model."


March – management is now thoughtfully evolving its approach

"We are intent on improving our business performance by thoughtfully evolving our approach to ensure that we are delivering the most compelling value, service and convenience to each of the approximately 70 million customers who choose McDonald's each day."


On a global basis, MCD had a relatively strong May-August sales period.  Since then, trends have continued to deteriorate.  Since the December sales press release, it has been clear that management is still looking for an answer to evolving consumer expectations.  We don’t believe installing high density tables will help solve this problem.


The language in the February release says they are working hard, but there is still no actionable plan in place.  After missing numbers yet again, today’s press release suggests that whatever plan they thought they had in place must be reevaluated.


The red lines in the charts below signify a company that is in a secular decline.  Europe and APMEA look to be bottoming, but the secular decline in the US is dragging down global numbers.


Until we begin to see these trends improve, we remain bearish on MCD.


$MCD | The Anatomy of a Monthly Sales Press Release! - mcd large

$MCD | The Anatomy of a Monthly Sales Press Release! - mcd2



Cartoon of the Day: Obamacare

Cartoon of the Day: Obamacare - Too Few


According to the latest numbers, 4.2 million Americans signed up for Obamacare between October 1 and March 1. That’s far short of the administration’s expectations and well below enrollment projections from the Congressional Budget Office.




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Retail Callouts (3/12): FW, NKE, MW, AMZN, LB, HMB, TGT, Alibaba

Takeaway: Footwear/Jordan on fire. MW biz weakens as deal inks. Music to boost AMZN Prime. LB/Giselle lovers quarrel. H&M invades. Swatch sues TGT.




  • DKS - BofA Consumer & Retail Conference: Wednesday 3/12, 10:30am
  • JWN - BofA Consumer & Retail Conference: Wednesday 3/12, 10:30am
  • PETM - BofA Consumer & Retail Conference: Wednesday 3/12, 1:30pm
  • WSM - Earnings Call: Wednesday 3/12, 5:00pm



  • GCO - Earnings Call: Thursday 3/13, 8:30am
  • DG - Earnings Call: Thursday 3/13, 10:00am
  • ARO - Earnings Call: Thursday 3/13, 4:15pm
  • ZUMZ - Earnings Call: Thursday 3/13, 5:00pm



  • ANN - Earnings Call: Friday 3/14, 8:30am
  • BWS - Earnings Call: Friday 3/14, 9:00am
  • BKE - Earnings Call: Friday 3/14, 10:00am
  • HIBB - Earnings Call: Friday 3/14, 10:00am




Athletic Footwear


Sales over the past 3-weeks have been on a tear -- +27%, +10%, and +10% in each week, respectively according to NPD data. Brand Jordan has been particularly strong -- which is an understatement -- with trailing three week sales numbers up over 75% YY. The other callout would be UA, which released the Speedform Apollo two Fridays ago. Due to the timing of the release it's tough to get a good sense of sales trends - but one thing of note is that Units and $ are up big while ASP's are negative. This is due to two factors 1) liquidation of excess inventory, and 2) lower starting price point for the Speedform Apollo which retails for $99 compared to last years releases which started at $120.




MW - 4Q Earnings


Takeaway: Convenient for MW that they preannounced a quarter with their worst inventory position in years on the same day they ink the deal for the transformational JOSB acquisition.


Retail Callouts (3/12): FW, NKE, MW, AMZN, LB, HMB, TGT, Alibaba - chart1 3 12


MW, JOSB - Men's Wearhouse To Acquire Jos. A. Bank For $65.00 Per Share In Cash



  • "The Men's Wearhouse and Jos. A. Bank Clothiers today announced that they have entered into a definitive agreement under which Men's Wearhouse will acquire all of the outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of $1.8 billion.  The boards of directors of both companies have unanimously approved the transaction."
  • "Men's Wearhouse shareholders will benefit from approximately $100 to $150 million of run-rate annual synergies realized over three years, through improving purchasing efficiencies, optimizing customer service and marketing practices, and streamlining duplicative corporate functions.  Additionally, Men's Wearhouse's vertical direct sourcing model will be leveraged to improve combined merchandising and sourcing across the combined company and rationalize inventory over time."
  • "The combined company will be the fourth largest U.S. men's apparel retailer with pro forma sales of approximately $3.5 billion.  This transaction brings together a high-value collection of national and owned brands.  Building on the two companies' complementary business models, the combined company will better serve an expanded customer base in more locations and optimize merchandising and sourcing capabilities."


AMZN - Amazon Working on Music-Streaming Service



  • " Inc. is hoping to offer an on-demand music-streaming service to customers of its Amazon Prime program, but it may limit how much a person can listen to any given song, according to people familiar with the matter."
  • "The Seattle-based company has held negotiations with record companies and music publishers seeking to license their music for the planned service, but it remains far apart from some record companies on financial terms, these people said."
  • "The music service is one of several new features that Amazon may add as it raises the price of Prime to as much as $119 a year."


Takeaway: AMZN's world continues to revolve around Prime -- much like how Costco's revolves around its membership fee. COST loses money excluding its fee -- AMZN loses money regardless. Perhaps a boost in Prime would put AMZN solidly into the black, as $119 per year represents a 50% increase from current levels. But customer attrition is obviously critical. Sounds risky to us.


LB - Gisele Bundchen Is No Angel as Victoria’s Secret Rival



  • "Gisele teaming up with closely held lingerie maker Hope to open the first Gisele Bundchen Intimates store in Sao Paulo in May. That same month, a Victoria’s Secret-branded shop is set to begin selling bras and panties in Brazil."
  • "...Gisele will also help Sao Paulo-based Hope open stores in London, New York, Los Angeles and other major cities next year, said Fabio Figueiredo, the company’s director of expansion. Hope aims to more than double the number of countries where it sells its underwear to 40 this year, he said."


Takeaway: LB has zero recourse on this one. The damaging part is not that it no longer has Giselle, but that she's helping to build a competitor.


TGT, UHR - Swatch Files Lawsuit Against Target Corp.



  • "Swatch AG has filed a lawsuit against Target Corp., alleging the discounter of selling watches that copy its designs."
  • "The filing includes images of Swatch and Target watches with zebra-printed wristbands, as well as multicolor watches from both companies. Swatch’s round, brightly colored face without numerals are among the item’s elements, the suit notes."
  • "Swatch described the quality of Target’s watches as “inferior” to its own and said the continued sale of those watches is likely to confuse shoppers and damage the company’s sales. Swatch’s aim is to have Target cease selling the alleged copies, recoup profits from prior sales and attain damages."


Takeaway: Seriously…this is all Target needs right now. Jewelry/Watches is a reasonably profitable part of the store, and profit is driven not by $45 Timex Ironman watches, or Disney watches at $16.99 -- but by its similarly-priced product under its own store brands. The challenge for Swatch will be in proving that the designs are proprietary. But Swatch is traditionally not a very litigious company -- it only picks a fight when it really thinks it can win.


HMB - H&M's COS Set to Cover the Coasts



  • "H&M’s plans for COS’ arrival in the U.S. are taking shape. After the first COS store in the U.S. premieres this spring at 129 Spring Street in New York’s SoHo neighborhood, the sleek, professional sibling of H&M has set its West Coast debut by signing a lease for an estimated 13,000-square-foot unit at 357 North Beverly Drive in Beverly Hills. COS, which stands for Collection of Style, has about 80 stores worldwide, but has yet to open stores in the U.S."
  • "COS isn’t only coming to America via its own stores. The retailer will continue a partnership started last year with Opening Ceremony by opening pop-up stores at the designer retailer’s outposts in New York and Los Angeles on April 17. The COS pop-up stores at Opening Ceremony will last until supplies run out. COS will be made available on opening as well."


Retail Callouts (3/12): FW, NKE, MW, AMZN, LB, HMB, TGT, Alibaba - chart3 3 12


Takeaway: There are maybe two or three companies in retail where we pay attention to WHATEVER they do. H&M is one of them. We hope other retailers in the US are doing the same.




Alibaba - Alibaba buys majority stake in ChinaVision



  • "Alibaba...has paid more than $800m for a majority stake in Hong Kong-listed ChinaVision Media Group, continuing a string of acquisitions that total nearly $3bn over the past year."
  • "Alibaba is preparing for an initial public offering expected for this year either in Hong Kong or New York that is expected to value the company at more than $100bn...Most of Alibaba’s recent acquisitions have been intended to shore up perceived weaknesses ahead of the IPO, mainly in the area of mobile internet."
  • "The ChinaVision deal will address what analysts say is Alibaba’s competitive disadvantage in video entertainment, where it lags behind both Baidu and Tencent. China’s online video scene is already the biggest in the world, with more than 400m viewers and hundreds of millions more set to join as superfast 4G connections become more popular."


Ace Metrix Unveils Top Ad Brands



  • "Ace Metrix’s Blackbook list of the most effective television advertising brands is out, and Reebok scored the top spot."
  • "Winners are based on their Ace Scores, which reflect the interplay between an ad’s measured 'persuasion' — comprised of likability, information, attention, change, relevance and desire — and its measured 'watchability' and the likelihood of watching the ad again. All nationally aired ads are scored by more than 500 U.S. consumers weighted to the U.S. census for age, gender and income."


Retail Callouts (3/12): FW, NKE, MW, AMZN, LB, HMB, TGT, Alibaba - chart2 3 12


Takeaway: Yesterday we highlighted a survey of the least favorite brands, as measured by an independent survey of 32,000 consumers. American Apparel, Sears and K-Mart all scored among the most hated. But this survey is tougher to stomach. Only 500 consumers -- and they collectively rated Reebok and Skechers ahead of Nike. Seriously?


ANF - Hollister to Sell SeaVees Footwear



  • "...Hollister will feature an exclusive male footwear line from SeaVees featuring signature Hollister colors on twill lace-up and slip-on sneakers."
  • "The exclusive line, which will be available only at, is the latest effort to move the businesses toward a wholesale model."


SQBG - Sequential Taps Jameel Spencer as CMO



  • "Sequential Brands Group Inc. has hired brand strategist Jameel Spencer as chief marketing officer, a new position. Spencer will report to Sequential chief executive officer Yehuda Shmidman."
  • "Prior to joining Sequential, Spencer was cmo at Iconix Brand Group, and oversaw the marketing for brands such as Ed Hardy, Ecko, Umbro, Rocawear and Roc Nation."
  • "In his new role at Sequential, Spencer will develop and lead global marketing initiatives for the firm’s portfolio of brands that include William Rast, DVS, Caribbean Joe, Ellen Tracy and Revo, among others."

PODCAST | McCullough: What Could Possibly Go Wrong?



Hedgeye CEO Keith McCullough discusses growing market complacency and where the biggest market risks and opportunities exist in this morning's macro call.


Tickers:  NCLH, CCL




  • SGMS F4Q 2013 conference call:  5:00 pm (pw: 36357318)
  • STN F4Q 2013 conference call: 4:30pm 
  • MTN FY2Q 2014 conference call:  4:30 pm
  • JP Morgan Gaming, Lodging, Restaurant & Leisure Forum

Thursday, March 13

  • JP Morgan Gaming, Lodging, Restaurant & Leisure Forum

Monday-Thursday, March 10-13

  • 2014 Cruise Shipping Miami Conference (CSM)

Friday, March 14

  • Hyatt Investor Day


NCLH (CSM):  Norwegian Escape home base in Miami - will sail Eastern Caribbean itineraries starting 11/14/2015.  Harvest Caye in Belize on track for 2015. 


Takeaway:  Isn't Miami and the Caribbean crowded enough?


NCLH (CSM):  The rates for near-term Caribbean continue to be pressured, and it appears that when others are troubled, Norwegian’s rates suffer in tandem, though perhaps it could be a temporary situation because Norwegian’s increasing Caribbean capacity is happening so quickly.  Asked if Norwegian gained or lost from Carnival's woes last year, CEO Sheehan said, "We're competing with two big public companies that have multiple brands. In the case of Carnival Corp., there are 10 or 11  brands, so we never really know exactly what's going on in a particular brand."  Sheehan stressed the importance of attracting the 1st time cruiser -  "At the end of the day, when you think about that last third, or whatever the percentage that people say is new to cruising piece, maybe that was a little bit more [for us due to the woes of] Carnival."


Takeaway:  Our pricing survey detected price discounting by NCLH in the Caribbean a couple of months ago. This remains an overhang on the company.  


CCL (CSM):  Costa to add a second seasonal ship in Miami Miami Herald

Costa Cruises will double its presence in Miami at the end of the year, sailing two ships in the Caribbean - Costa Luminosa and Costa Mediterranea.  Scott Knutson, vice president of sales and marketing for Costa Cruises North America, said the demand was strong enough to bring more capacity over.  “We’ve had nice momentum here in the North American market,” he said. “I think that’s been recognized.”


Takeaway:  Costa is having a decent year in Europe.  Positive commentary for its small Caribbean presence is encouraging for the brand.


NCLH:  Israeli tourists on cruise prevented from disembarking in Tunis Jerusalem Post

Israeli tourists traveling on Norwegian Jade were prevented from disembarking at a stop at the Port of Tunis.  As a result of this incident, NCLH has dropped Tunisia from its itineraries and will not return.


Ukraine & Russia Tensions (CSM):  RCL CEO Richard Fain said while many customers aren’t concerned, “some customers” booked on Baltic voyages visiting St. Petersburg were indeed calling to express concern or ask to make changes to their booking.  At present, there are no changes in his brands’ itineraries, though.


Takeaway:  While the Baltic/Black Sea itineraries are a small part of European cruise itineraries, they will still have an impact on cruiser sentiment and should not be ignored.


Macau – United States Department of State’s wants Macau to lower the threshold for reporting gaming-related financial transactions from US$62,500 to US$3,000.  The US Department of State also wants increased oversight and regulation of junkets in an effort to reduce potential money laundering activities.


Takeaway:  Political payback for Steve and Sheldon?  Maybe.  It's not like US government agencies haven't been used against political enemies in the [recent] past (cough, cough, IRS, cough, cough).  Macau can tell the US to pound sand and probably will.  It is something to monitor, however, as this would not be good for the Operators and Junkets for obvious reasons.


Delaware – The Lottery and Gaming Commission recommended financial relief to Delaware’s casinos including a decrease in table gaming tax from 29.4% to 15%, elimination of the annual table game fee, and sharing the cost of slot machines.  The recommendations were sent to Delaware’s General Assembly for debate and vote.


Takeaway:  Another gaming jurisdiction under pressure.  Would be good for DDE.


Las Vegas – Culinary Workers Union Local 226 continue to picketed outside Strip properties ahead of a March 20 vote that would give the union the right to call a strike.  Culinary Workers Union Local 226 is pushing about a dozen of its employers to contribute more money to its health insurance fund to cover rising Affordable Care Act costs.  Local 226 it is pressing its employers to boost their contributions by 35 cents per worker in the first year, 50 cents in the second and 55 cents in the third. So far, the union has reached agreement with five casino operators, leaving 7,000 union members with expiring contracts.


Takeaways:  Can't really keep modelling flat costs for Vegas operators.



Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 


Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

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