McDonald's worst monthly sales in 9 years

McDonalds has 33 500 restaurants serving 62 million people a day in 119 countries. They sell 75 hamburgers every second, have a workforce of 1 million people in the US alone and are the biggest toy distributor in the world. The McDonalds sign is globally recognized by their golden arches, they look to open a restaurant a day in China over the next three years and even the queen of England owns one in her property portfolio.


Unfortunately, for the first time in 9 nine years these 33 500 stores reported a decline in sales. The company reported that same store sales (stores open at least 13 months) dropped 1.8% in October versus expectations of -1.1%. The stock was down 2% on the news. Before we panic too much, there were less trading days this period compared to last which had quite a big impact but for a company we expect to show strong growth, this is of course negative news.


Per region the US was the biggest disappointment. Same store sales (SSS) were down 2.2% due to modest consumer demand and heightened promotional activity. A 1.3% adjustment is needed because of less trading days but again the number is still negative. They cite heavy competitive activity as one of the reasons. Burger King, Wendy's and Taco Bell have all been innovating their menus with exciting new products.


Europe also fell 2.2% but would have been flat were it not for the negative trading day impact. This is where McDonalds have been struggling in the last few quarters. They seem to have more exposure to Europe than the others. Not only has sales been weak but the Euro has also weakened which is not good for the dollar reporting financials. You know our thesis on Europe though. Things are going to turn out better than what the market thinks.


Developing markets also struggled. SSS was down 2.4% but up 1% on a trading day adjusted basis. They are still opening up stores extremely quickly in these areas so you would expect decent overall revenue growth by year end. We are still happy to add to McDonalds at these levels and will take advantage of the recent fall in the share price. They are a good proxy to the European consumer, will benefit when momentum in the US continues and will continue growing in the big developing areas.