MCD: STRONG SALES

McDonald’s sales came in very strong in July with the U.S. and APMEA showing considerable improvements in two-year average trends.

 

In my preview note last week I outlined some GOOD, BAD, and NEUTRAL ranges for MCD same-store sales in July.  In the U.S., July comparable sales increased 5.7%.  In my preview, I wrote that any print above 5% would be a GOOD result as it would imply an increase in two-year average top line trends.  The 5.7% number resulted in a 27.5 bp sequential increase in two-year average trends when adjusted for calendar shifts.  As outlined on the 2Q earnings call the momentum in July is due to the recently launched McCafe Real Fruit Smoothies and Frappes along with value-based drinks.  Looking forward to August, at least a 4.4% print will be required to maintain two-year average trends when calendar shifts are taken into account; same-store sales comparisons remain relatively easy in August.  

 

For Europe, comps came in at 5.3%, which was at the high-end of my NEUTRAL range of 3.5% to 5.5%.  Two-year average trends did increase by 42.5 bps on a sequential basis, when adjusted for calendar shifts.   Management’s commentary on the 2Q release that July global comparable sales were in-line or better than second quarter results was confirmed by a 5.3% print for Europe versus 5.2% in 2Q.  Management attributed the increase to Europe’s “unique premium menu offerings, compelling value and the ongoing modernization of Europe’s restaurants.”  Looking forward to August, a further acceleration to 6.8% comparable store sales number would hold two-year average trends level from July. 

 

For APMEA, comparable store sales came in at 10.1%.  This number was far in excess of the 7% level I had for a GOOD result.  On a two-year average basis, when adjusted for calendar shifts, trends improved 182.5 bps sequentially.  APMEA’s strong number benefitted from strong sales growth in Japan, Australia and China.  Looking forward to August, a 10.5% print will be needed to maintain two-year average trends on a sequential basis.  August 2009 comparable store sales increased 2.2%, versus 4.3% in July, so it should prove to be an easy compare for APMEA sales.

 

 

Howard Penney

Managing Director


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