Why should we care about McDonald’s same-store sales and guest counts?
Understanding McDonald's: Comprehensive company primer and profitability analysis (Part 6 of 21)
In order to understand what is driving McDonald’s earnings and free cash flows, it is essential to understand same-store sales and guest counts for the company. Same-store sales is a statistic used in the investment industry that compares the sales of stores that have been open for at least one year. The statistic helps analysts evaluate what percentage of new sales come from organic sales growth vs. opening new stores. In addition, global revenues for McDonald’s restaurants are expressed in constant currency terms to adjust for moves in major currencies on an annual basis.
In the United States, the increase in 2012 revenues was driven by positive comparable sales in 2012. Value offerings, new menu items and rebranding contributed to these results, despite increasing competition. Revenues in 2011 were strengthened by new McCafe beverage items.
In Europe, revenue growth in 2012 was primarily driven by positive comp sales in Russia and United Kingdom. In 2011, growth was driven by increasing comp sales in France and Germany.
In APMEA, revenue growth in 2012 and 2011 was driven by comp sales in Australia, China, and others.
In the following graph, you can see McDonald’s same-store sales growth by geography. It is evident that emerging markets and Asia have slowed down the most in recent quarters. The weakness in the Asian economies has driven this weakness, but could take a turn as these economies recover in the intermediate term (2-5 years).
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