McDonald’s Sales Grow

Despite a sinking global economy, McDonald’s Corporation (MCD) continues to grow same-store sales while maintaining healthy margins and outperforming competitors. In the current economic environment where GDP is falling and unemployment is on the rise, McDonald’s was able to boost its domestic share with its Dollar Menu products like the Big Mac and McCafe premium coffees.

McDonald’s’ global same-store sales for the month of July rose 4.3% (versus 8.0% increase last year for the comparable month). System-wide sales for the company’s worldwide restaurants fell 0.3% for the month, due to the adverse impact of foreign currency translation. However, in constant currencies, system-wide sales increased 6.2%.

McDonalds’ U.S. business same-store sales rose 2.6% in July (versus 6.7% increase last year for the comparable month) boosted by new product offerings.

In Europe, same-store sales jumped 7.2% (versus 7.6% increase last year for the comparable month) driven by strong performance in the U.K. and France.

Same-store sales in Asia-Pacific, Middle East and Africa (APMEA) climbed 2.1% (versus 7.2% increase last year for the comparable month) driven by Australia but partially offset by China.

McDonald’s operates in the Quick Service Segment, which has held up within the economic turmoil to some extent. Cash-strapped consumers are trending towards lower-priced dining options. The company, with its lower-priced menu, continues to lure budget-constrained consumers.

In the Quick Service Segment, McDonald’s competes with Burger King (BKC), Krispy Kreme Doughnuts (KKD), Yum! Brands (YUM), Papa John’s International (PZZA) and Chipotle Mexican Grill (CMG).

We keep our current recommendation on the stock as Outperform.

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