McDonald's (MCD) said its monthly same-store sales rose in May, marking just the second positive month of the year and coming in as the best reading since last August.The Oak Brook, Ill., Big Mac seller said global comparable sales were up 2.6% for the month, exceeding the 1.9% forecast. The increase was the strongest since the 3.7% gain of 10 months ago.
Going back to October, same-store sales for the restaurant chain, which is approaching 35,000 units in its name, have had their roughest stretch in years. Before then, it had been almost a decade since comps were negative for a month. However, coming into May, four of the last seven were in the red, and one was unchanged.
This time around, McDonald's reported growth in all its major geographic groups. U.S. comparable sales rose 2.4% for the month. Breakfast, a renewed focus for McDonald's, with options such as the Egg White Delight, along with chicken items, including the new McWrap, drove the increase. The company added that its value menu's dollar offerings also brought consumers in.
In Europe, same-store sales were up 2%. The U.K. was a star for the region, but Germany and France were weak. For the Asia-Pacific, Middle East and Africa segment, comps were ahead by 0.9%, with promising results in several markets. Still, Japan was "relatively flat," while China was negative, a result that McDonald's attributed to a recent bird flu scare.
Despite the upbeat month, McDonald's year-to-date same-store sales are down 0.2% because of the general sluggishness in the prior four months.
As for the entire system, sales for May climbed 3.6%, or 5.2% were currency rates held at constant levels with the prior year's average levels. The great majority of McDonald's restaurants are run by franchisees, and systemwide sales are used to get a sense of the health of the overall business.
In recent trading, McDonald's shares were up 1.6% at $99.89. The shares have been as high as $100.18 during the session. Thus far in 2013, McDonald's has gained 9.1%, according to Yahoo! Finance data, trailing the Dow Jones Industrial Average's 13.7% advance and the 12.4% climb of the S&P 500. Last year the stock dropped 10.8%.
Competition, though nothing new for chain restaurants, has become more of a focus for the entire sector, including McDonald's. Along with watching direct competitors Wendy's (WEN) and Burger King (BKW), it has to fret about Subway, "better burger" chains such as Smashburger, and fast-casual options in the category that contains former underling Chipotle (CMG).
That's prompted the company to try new limited-time offers and full-time items, along with a pricing scheme meant to coax in diners by offering lower-cost fare. In addition to the sandwiches mentioned above, Fish McBites earlier in the year made a brief appearance on the menu, and now McDonald's is experimenting with an expanded-hour breakfast lineup.
- Consumer Discretionary