McDonald's (MCD): Blame It On The Weather

Retail

Published: January 28, 2008 10:23 am

McDonald’s (MCD) was the greatest stock in the US until it wasn’t. Improvement in same-store sales in the US and overseas drove the stock from below $32 in June 2006 to over $63 just five weeks ago.

MCD had a yield of over 2.5% and a perfect balance sheet. The firm seemed recession-proof. How can things get so bad that people will not buy hamburgers?

Much of the excitement that built up around the big fast food chain was due to its move into the premium coffee business and its early AM breakfast results. These seemed to lift the place from just being a lunch and dinner joint. The success of the new "morning McDonald’s" also drive shareholders out of Starbucks (SBUX) shares like a herd of cattle.

Now McDonald’s has come back to earth Shares are down 8% today. It is just a bunch of restaurants with a red-haired clown as a spokesman. Why was the fourth quarter slow in the US? "Severe winter weather throughout the month and softer consumer spending resulted in December U.S. comparable sales being flat."

Blame it on the weather.

Douglas A. McIntyre

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