- Currency Risk
MCD’s July comparable sales were up 7.6% in Europe versus a 7.7% increase last year. MCD’s Europe division has posted consistently strong same-store sales results, which has translated to high operating income margins. Europe’s operating income growth, however, has been boosted by a growing foreign currency benefit for the last eight quarters. In 2Q, this currency impact helped by 16% in line with 1Q. As Keith McCullough highlighted earlier today, the U.S. Dollar Index is up 5% since July 14, which indicates the benefit MCD has seen from this currency cushion will begin to slow in the coming quarters. MCD’s Europe business has posted impressive operating growth in the double-digit range even excluding currency, but the incremental currency flow through has helped to offset U.S. margin weakness as it relates to the company’s consolidated operating income.
Keep a "Trade" a trade however. Commodities down, inflation down, will be the squeeze "Trade" that the Street cannot ignore.
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My critical resistance level was 75.08, and the US Dollar Index is trading comfortably above that now at 75.77, up a whopping +5% since July 14th (when the S&P 500 hit an intraday low of 1201).
Dollar up, Euro down, Commodities down, inflation abates... I like it, for a "Trade".
- US$ Breaking Out
Another phrase that will join the list of commonly used phrases by the restaurant industry is “the health of the franchise system.”
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