Same-Store Sales Should Add to Worries at McDonald's

Paul Ausick

McDonald’s Corp. (NYSE: MCD) is in a funk. Same-store sales rose just 0.5% year over year in November, and the company’s overall strategy is not doing much to turn the ship around.

Same-store sales in the United States fell 0.8% (+0.1% higher on a constant currency basis) and 2.3% in the Asia/Pacific/Middle East/Africa (APMEA) (+2.6% in constant currency). Europe posted a gain of 1.9% (+4.8% in constant currency). For the year to date, same-store sales are up 0.4%, compared with a gain of 3.4% a year ago.

The company cited competition and no increase in store traffic as the reasons for the drop in U.S. sales, while the APMEA sales decline was attributed to poor sales in Japan. In Europe, the rise came in the United Kingdom, France and Russia, partially offset by losses in Germany. Poor traffic appears to have been offset by promotional pricing, among other things.

McDonald’s CEO had this to say:

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.

In its report of third-quarter results, the company said that fourth-quarter sales would be in-line with recent quarterly trends while restaurant margin percentages are expected to decline at a level relatively similar to third-quarter results. Shortly thereafter, McDonald’s told an investor day audience that it continues to target systemwide sales growth of 3% to 5% on a constant currency basis. Systemwide sales grew 3.1% in November, after rising 3.0% in October, so the company is managing to meet the low end of its expectations.

At the investor day presentation, the company’s CEO had this to say about next year: “While the fundamentals of our business have not changed, when we look at the market dynamics for 2014 we do not see material changes versus 2013.” Translation: Nothing we are doing is working, but we will keep doing it anyway.

McDonald’s stock was trading down about 0.7% at $96.15 in premarket trading Monday, in a 52-week range of $86.81 to $103.70.