Financial Trading Blog
Stock of the day 05/12/2014 – McDonald’s Corp
October’s sales were down 1% in the US, 0.7% in Europe and a massive 4.2% in Asia, the Middle East and Africa. This news followed a round of bad PR for the company, as it came to light in July that franchises in China were potentially stocking expired meat. This led to a massive recall of beef, pork and chicken products in China, with McDonald’s warning this would have a big knock on effect to global sales. This was felt in the third quarter results, where global sales fell by 3.3% and consolidated revenues decreased by 5%.
As well as this scandal, McDonald’s have been suffering from some more generalised problems. A combination of franchise oversaturation and the growth of health-conscious attitudes in the US mean that the company cannot expand much more in its core markets. This has led to attempts to expand in other areas.
In 2014 McDonald’s offer 121 menu items, compared to a mere 9 when the first store opened in 1948. This expansive menu has led to a slowdown in service times, without seeing any growth in sales stemming from new products. Though McDonald’s have pledged to trim its menu, it has also vowed to increase customisation options for customers who want a more personal touch. The contradictory nature of these two plans highlights the struggles the company are currently undergoing, as its tries and fails to restore its sales figures.
Unsurprisingly these woes have made themselves felt on McDonald’s share prices. After reaching a 2014 peak in May at 10367, a combination of the meat scandal, poor sales and weak third quarter results saw a low of 8945 in mid-October. After this slump prices began to climb again, reaching 9734.5 by late November. However, for a company of this size falls like this are disappointing, and prices have once again dropped by around 200 points at the end of this week.
Despite the exciting news that McDonald’s will open restaurants in Kazakhstan in 2015, the company will be looking with trepidation at the November sales release on Monday. There has been no significant news since October that suggests sales will see a turnaround; the best McDonald’s can hope for is a slowdown in its decline.
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