Time to Spit Out McDonald's?

McDonald's (NYSE: MCD  ) same-store sales flagged in November. Is it time for investors to say no to further helpings of the burger chain's shares?

The fast food giant's same-restaurant sales in the U.S. dipped 0.6% in November. Worldwide, same-restaurant sales increased 0.7%. For the month, overall sales increased 10.1% (or 2.3% in constant currency).

Starting to get worried? Take a deep breath and count to 10. Mickey D's sad-sounding November turnout may not be that surprising. Black Friday bombed for most retailers, as folks went out to shop but demanded rock-bottom deals. Though November generally revealed a wary, tightfisted consumer mind-set, McDonald's may be better-positioned for such lean times than many of its competitors.

This year, Wal-Mart (NYSE: WMT  ) , Target (NYSE: TGT  ) , and Amazon.com (Nasdaq: AMZN  ) have made headlines for launching brutal price wars well before the holiday season began. Apparently, even the fast food industry is on a similar warpath. Burger King (NYSE: BKC  ) and Yum! Brands' (NYSE: YUM  ) Taco Bell are reportedly slashing prices to try to take a big bite out of McDonald's. Mickey D's CEO Jim Skinner seems unruffled, noting that his company is "focused on growing market share with a disciplined pricing strategy."

In addition, don't forget that McDonald's latest earnings faced tough comparisons to its year-ago quarter. The company has been weathering the recessionary storm well, making it harder and harder to keep looking so impressive as its successes stack up. Last November, its comps jumped an amazing 7.7%. But October 2009 was less impressive: U.S. comps fell 0.1%, though worldwide same-store numbers jumped 3.3%.

So far, though, the trend in 2009 has been solid:

McDonald's Same-Store Sales Growth

Q3
Sept 30, 2009

Q2
June 30, 2009

Q1
March 31, 2009

3.8%

4.8%

4.3%

One month of lackluster comps in an ugly consumer environment shouldn't derail long-term investors. True, they should gird themselves for those more comparisons in a difficult consumer spending climate. But let's not forget that McDonald's has burned naysayers who get caught up in near-term pessimism, too.

Given McDonald's historical success in battling back recessionary malaise and delivering impressive growth, as well as nice extras like its 3.6% dividend, investors should see the Golden Arches' weak near-term stock price as an appetizing opportunity -- not a reason to bail.

Amazon.com is a Motley Fool Stock Advisor recommendation. Wal-Mart is an Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1062053, ~/Articles/ArticleHandler.aspx, 4/18/2014 2:50:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement