Is McDonald's Starting to Lose Ground in Its Multi-Front War?

Mighty Wings, McRib, Monopoly, McCafe -- it almost seems like the more McDonald's (NYSE: MCD  ) adds to its menu, the more it pushes customers away. As the company struggles to get back into the growth groove again, competitors such as Burger King Worldwide  (NYSE: BKW  ) are seizing the opportunity to snatch market share.

November same-store sales
On Dec. 9, McDonald's issued a press release containing its same-store sales for November. In the U.S., sales slipped 0.8%. In Asia and Africa, they plunged 2.3%. The bright spot was Europe, which saw a 1.8% increase.

In the U.S., same-store sales have gone from mediocre to bad and then from bad to worse. In the July to September period, U.S. same-store sales were up 0.7%. Then in October, they were up only 0.2%. For November, they were negative 0.8%. The trend is not good, especially given how aggressive McDonald's has been with new product and promotion rollout. Either these new items don't appear to be working very well, or they're actually backfiring over time.

In a press release on Nov. 8 regarding monthly U.S. same-store sales, CEO Don Thompson stated, "Moving forward, the U.S. is intent on strengthening its underlying business momentum..." Instead, McDonald's posted a 1% swing downward from 0.2% to negative 0.8%. Fast-forward to Dec. 9, and now Thompson is saying, "Looking ahead to 2014, the U.S. is intent on rebuilding its underlying business momentum..." In one month, McDonald's went from "strengthening" the momentum it already supposedly had to now just trying to rebuild it and dig itself out of the hole. It doesn't sound like December is doing very well, either, as McDonald's now targets 2014.

Thompson blamed the U.S. weakness on "ongoing competitive activity and relatively flat industry traffic trends." Ongoing competitive activity sounds an awful lot like rivals successfully stealing market share from McDonald's.

Burger King Worldwide, the market share thief
Burger King Worldwide doesn't release monthly same-store sales numbers, but there are a number of clues that suggest Burger King is successfully taking a bigger stab than usual at McDonald's.

First, McDonald's is pushing apple slices to promote a healthy alternative to french fries. Burger King realizes that few people come to fast-food joints for apples and instead launched Satisfries, a lower-fat and lower-calorie version of regular french fries. Following the launch, Burger King noticed a spike in traffic at the end of September; this was right around the time sales were starting to slip for McDonald's.

Second, Burger King Worldwide launched the Big King and the Rib Sandwich, obvious knockoffs of McDonald's Big Mac and McRib. Its advertising doesn't even deny that they are knockoffs -- instead, it embraces it. One ad says, "The new Big King from Burger King may look familiar, but it's what's on the inside that counts. Our two fire-grill patties and king sauce makes all the difference."

Finally, here is the potential killer. Poor McDonald's only bright spots seem to have been in the "U.K., France and Russia." France is likely McDonald's strongest area in Europe since it was singled out in the last earnings conference call. Now, as of the Nov. 26 press release, Burger King is invading France in a joint venture deal with Groupe Olivier Bertrand. The two have set a goal of quickly taking 20% market share in France. Burger King has been doing steadily well in Europe, raking in a 2.4% same-store gain last quarter. It was the 11th quarter in a row of positive same-store sales gains in the region.

Foolish final thoughts
It's hard to count McDonald's out for the long term given its vast history of success, but it currently seems like the company has run into a bit of a speed bump. It can't accurately see where things are headed in the very short term, as evidenced by overly optimistic expectations for November even though those expectations were given eight days into the month. As such, it will be even more difficult for investors to handicap where things are headed. McDonald's is going to need some time to regroup and respond to the "ongoing competitive activity" from Burger King. Fools should consider waiting on the sidelines as McDonald's may get cheaper before its sales return to positive momentum.

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