McDonald’s Wins

After years of attacks about the quality of its food and an army of competitors led by Starbucks, McDonald’s has reasserted itself as what it has been along. It is the king of the fast food business. Its stock reached an all-time high yesterday, which is a level of proof of how well it has done in a crowded sector.

At $275, McDonald’s stock is up 3% this year, against an S&P 500 drop of almost 20%. Over the last two years, shares have risen almost 30% compared to a gain of 16% for the S&P 500. Starbucks shares are flat over the same two-year time period.

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Recently, experts say McDonald’s has become a more attractive place to eat (or take out) because of the surge in food prices. People can still get a meal for two at a price of about $20. Even if McDonald’s menu is filled with high-calorie food, a meal is a meal for many people.

McDonald’s made a move several years ago that has paid off like a slot machine. It began to offer a full breakfast menu, which moved it beyond its traditional lunch and dinner staples. It also began to keep some stores open 24 hours a day. It may lose money at 2 AM when it has to staff stores and there are almost no customers. However, the management knows whether or not this creates brand loyalty. It has to be a decision based on some customer satisfaction considerations – maybe.

McDonald’s still has a hill to climb if management wants many happy customers. The ACSI fast food rating system puts it at the bottom against 22 competitors. Perhaps management does not pay a great deal of attention to the rating. It has larger revenue than any other company on the list.

For shareholders, McDonald’s financial performance is what drives its shares. Last year, it had a revenue of $23.2 billion and a net income of $7.5 billion. It also has a dividend yield of 2.37%, which is a shareholder bonus in periods of inflation.

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As McDonald’s approaches its 70th birthday, its position at the top of the fast food business is cemented.