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Although diversification tends to be a fair hedge against many risks, McDonald's (MCD) has been observing a drop in comp sales all around the world. Despite its strong brand name in the fast food industry, the financial results for Q32012 did not display the kind of exceptional performance usually expected from McDonald's. The company faced slow growth in several key dimensions. More bad news came with the announcement of a 1.8% decrease in comp sales in October 2012. The news came as a shock as it happened for the first time in nearly a decade.
MCD introduced many promotional strategies to combat the worsening situation. It introduced the dollar menu and the Cheddar Bacon Sandwich, but they could not prove to be successful because of the modest customer demand. We feel that yet another reason behind the drop in SSS is the decline in customer confidence.
McDonald's is facing a growth crisis as its SSS fails to grow according to the consensus of analysts. The company recently reported a historic drop in SSS. Rising labor and input costs are making things worse. Although the company has come up with several strategies to cope with the coming challenge, we suggest that potential investors should wait until the results of the new strategies are disclosed. We have a neutral stance on MCD.
Source URL: http://seekingalpha.com/article/1024211-hitting-new-lows-mcdonald-s-same-store-sales-decline