Weighed down by food-safety concerns in Asia, McDonald's reported a 1% decline in last year's same-store sales, arguably the most important performance metric in the restaurant industry. It was the company's worst showing in more than a decade, and led to the resignation of CEO Don Thompson.
As you can see in the chart below, however, this isn't the first time McDonald's has seen comparable sales fall on a year-over-year basis. In 2001 and 2002, it dropped by 1.3% and 2.1%, respectively.
"Our 2001 performance was hampered by the strong U.S. dollar and weak economies in many countries in which we operate," wrote McDonald's then-chairman and CEO Jack Greenberg in his 2001 shareholder letter. "Additionally, despite McDonald's outstanding quality and safety record, our business suffered from consumer concerns about beef safety in Europe and Japan."
Importantly, these are the same issues that weighed on McDonald's performance in 2014. Thanks to inflationist monetary policy in Europe, plummeting oil prices, and a global currency war, the U.S. dollar is stronger than it's been in years. Furthermore, McDonald's saw one of its principal markets -- namely, Asia -- hampered by concerns about food safety after Chinese authorities accused one of its suppliers of selling expired meat.
In light of these similarities, it's worth noting that McDonald's not only rebounded after its performance in 2001-2002, but came back stronger than ever. Comparable sales eclipsed 2% in 2003 and reached nearly 7% in 2004. It wasn't until last year, in fact, that the company's string of annual same-store sales increases came to an end.
Even more significant for investors today was the trend in the share price of McDonald's following the earlier setback. From the end of 1999 to the beginning of 2003, the company's shares dropped by 75%. But they then mounted a decades-long ascent that blew away the broader market.
Factoring in dividends and share buybacks, McDonald's has returned a total of 888% during the last 12 years. That's four times better than the dividend-adjusted return of the S&P 500.
It's impossible to say whether McDonald's can mount a similar comeback today given heightened competition from the likes of Chipotle Mexican Grill and Five Guys, as well as the ailing global economy. But history nevertheless shows that investors shouldn't simply assume that a year or two of disappointing same-store sales marks the beginning of the end for McDonald's.