Long MCD – 7/8/15 Call Replay and Slides
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Our LONG thesis on McDonald’s is focused on three key points:
MCD has given up a lot of share to competitors as they have made many self-inflected wounds. We think that with the new CEO and the right initiatives in place they will reverse this trend, and steal back the share they lost.
Sales trends have been dismal over the last few years, and if you had to choose one thing to blame it on it would MCD’s lack of value. MCD has drifted away from providing value to their customers, but they are returning to the value message now with national advertising.
The menu was getting too complicated, it is very apparent that as the menu increases in size, sales decline.
Reducing CAPEX is going to be a big accelerator of growth. We used SBUX as an example, once they cut CAPEX, focused on their current stores and closed underperforming ones, you see a drastic increase in EBITDA growth. We expect to see the same from MCD as they close stores and reduce CAPEX.
We see very minimal downside in the stock given it has been trading so far below its peers for the last 3-5 years.