MCD - July Sales Preview

MCD is scheduled to report July comparable sales on Monday.  MCD said on July 23 in its 2Q09 earnings release that it expected to report July consolidated comparable sales similar to or better than June.  Specifically, management stated on its 2Q earnings call that July sales trends in Europe and APMEA were running better than June.  For reference, MCD’s June same-store sales growth was 1.8% in the U.S., 4.7% in Europe, 0.3% in APMEA and 2.6% on a consolidated basis, which represented a slowdown in 2-year trends in each geographic segment. 

 

Given that MCD had visibility on nearly 3/4 of the month when it gave its outlook on July sales trends, there is little chance that July results will vary too greatly from its guidance.  That being said, I wanted to provide comparable sales ranges for each geographic segment as a benchmark of what I think would be good, neutral, or bad results based on 2-year average trends. 

 

U.S. (company increased coffee giveaways, facing a tough 6.7% comparison from last year)


Good: +2.5% or better would signal a re-acceleration in 2-year average trends.

 

Neutral: +1.8% to +2.5% would signal an improvement in 2-year average trends, but is somewhat expected given the company’s guidance.

 

Bad: < +1.8% would come in below management guidance.  Anything below -1.3% would signal a continued sequential slowdown in 2-year average trends.

 

Europe (Germany was weaker in June due to less couponing YOY, rest of Europe continues to be strong)


Good: +6.0% or better would signal a return to the strong level of 2-year average trends that was present earlier in 2009.  Europe really only faced one month (June) of softness in 2–year trends.

 

Neutral: +5.0% to +6.0% would signal an improvement in 2-year average trends from June levels, but again is somewhat expected given the company’s guidance.  Although MCD’s guidance said similar or better than the 4.7% number in June, management said it was trending better than that so I think a better than 4.7% number is already built into expectations.

 

Bad: < +5.0% would come in below management guidance and built in expectation.  Anything below +3.0% would signal a continued sequential slowdown in 2-year average trends.

 

APMEA (Japan and China were responsible for June slowdown, Japan had improved off of June levels, China continued to be negative but was more negative in June than it had been for prior 5 months)


Good: +4.0% or better would signal a marked improvement on a sequential basis from June’s 0.3% number.  +7.0% or better would signal a return to the strong level of 2-year average trends that was present earlier in 2009.  Like Europe, APMEA really only faced one month (June) of softness in 2–year trends.

 

Neutral: +1.7% to +4.0% would signal that APMEA trends have stabilized with 2-year average trends flat with to slightly better than June levels. 

 

Bad: < +1.7% would be better than management guidance and would show a sequential improvement from June on a 1-year basis, but would signal a continued sequential slowdown in 2-year average trends.  Again, management had already stated that APMEA July trends were running better than June’s 0.3% number so some level of sequential improvement is built into expectations.

 


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