Will McDonald's Sales Freeze See a Thaw?

The restaurant industry is making the most of warmer spring weather, but the burger joint is still on ice.

Apr 18, 2014 at 10:00AM


The restaurant industry says higher same-store sales in March are lifting it out of winter's deep freeze, but McDonald's (NYSE:MCD) may not similarly enjoy the spring thaw. In fact, I'd question whether the fast-food industry as a whole will find the balmier temperatures enough to change its outlook.

Black Box Intelligence and People Report said restaurant comps rose 0.7% in March, up 1.4 percentage points from February's 0.7% decline, but that's less than half the rate other surveys found --  the MillerPulse report found sales 1.8% higher last month. Still, since they're both reporting things are trending higher now, that's good, right?

Not so fast. The weather shouldered a lot of blame for the poor showing restaurants recorded this past winter, but both surveys also show that store traffic is still falling. That means it's likely higher average check values, which themselves are up as a result of higher prices, that are driving the growth. Restaurants aren't pulling in customers.

McDonald's has recorded months of steep declines despite making rebuilding foot traffic a priority. It admits both guest counts and pricing have a greater impact on the average check size than any mix of products it may sell in driving comps at its restaurants. If industry peers continue having problems attracting customers, then McDonald's is sure to have another disappointing month.

Screen Shot

Source: McDonald's SEC filings.

According to Janney Capital Markets, however, a survey of the restaurant operator's franchisees show they're hopeful that March comps -- and April's, too! -- will be positive, a welcome trend from the four-straight months of falling comps they've endured thus far (80% of McDonald's restaurants worldwide are franchised).

On the whole, they're looking for a 0.6% rise in March; it's not evenly distributed, as stores on the East Coast forecast a 1.3% increase while those in the West see flat sales and the central division is looking for sales to creep just 0.4% higher. A 1.5% increase is expected for April, but that could be a lot of wishful thinking.

Nation's Restaurant News said franchisees aren't happy with the free coffee promotion McDonald's started as a means of fending off encroachment by rival chains on its breakfast daypart. The Janney survey found it was a failed effort that didn't drive sales, similar to the $5 20-piece chicken nugget campaign during the Olympics that also did not lift sales.

There may be a thaw coming for restaurants that caught the winter blues, but investors ought to be prepared for McDonald's failure to bloom with the rest.

3 stocks to own for the rest of your life
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information