Preview for Investors: McDonald's 1Q15 Earnings (Part 2 of 5)
Same-store sales growth
In the last part of this series, we saw that the market anticipates a lower EPS (earnings per share) in 1Q15. This seems to stem from the fact that McDonald’s (MCD) has been struggling to strike a chord with its customers. This is evident in its same-store sales.
In the above chart, you can see that McDonald’s continues to struggle in the three markets—the US, APMEA (Asia Pacific, Middle East and Africa), and Europe. McDonald’s is one of the companies that posts monthly same-store sales data. After the fourth quarter, which ended in December, McDonald’s continued to struggle in the market.
For February, US same-store sales declined by -4%—compared to -1.4% in the same quarter last year. The APMEA region’s same-store sales growth declined by -4.4%—compared to -2.6% last year. Europe’s same-store sales growth was up 0.7%—compared to 0.6% last year. The company is struggling in the domestic and international markets.
What’s causing the drop?
According to the company, US same-store sales were impacted because of “aggressive, competitive activity.” In the US, the burger market is saturated with players like Burger King (QSR) and Wendy’s (WEN). Newer players like Shake Shack (SHAK) and Habit Grill (HABT) also entered the market. They plan to expand quickly.
According to the company, the European market was impacted because of France and Russia. To remedy this, the company plans to focus on growing the breakfast daypart . The APMEA market was impacted because of the meat supplier scandal in China. The scandal gave Chinese customers a negative perception about McDonald’s.
Other restaurants, like those included in the C onsumer Discretionary sector (RXI ) (XLY), also took a hit in this market. The Consumer Discretionary sector holds 10% of restaurant stocks.
In the next part of this series, we’ll look at the second most important revenue driver—unit growth.
Browse this series on Market Realist: