Why Weak McDonald’s Sales Are Looking Good

Comparable sales were expected to decline by 1.8% globally, according to the Consensus Metrix research firm.

In terms of the breakdown, U.S. comparable sales were down 2.3%, Europe was up 1.0% and Asia/Pacific, Middle East and Africa (APMEA) was down 3.8%.

The U.S. comparable sales suffered due to ongoing competitive activity and negative customer traffic. McDonald’s is currently in the middle of a total overhaul on its image in an attempt to drum up more traffic domestically. Current initiatives include adding kale and other organic food to the menu, and the company is even rebranding the Hamburglar.

Ultimately the fall in the U.S. comparable sales was in line with analysts’ expectations.

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Europe’s performance was the saving grace for McDonald’s in April. Strong results in the United Kingdom and Germany helped offset weaker performances in both France and Russia. McDonald’s Europe continues to target opportunities to enhance its popular promotional menu options and build on its value, breakfast and family business amid ongoing macro-economic headwinds across much of the segment.

Analysts were only expecting a 0.2% increase for European sales.

The drop in APMEA is not as bad as was expected, with analysts calling for a drop of 5.8%. The decline was attributable to a challenging Japanese market but slightly offset by strong sales in Australia.

Steve Easterbrook, president and CEO, commented on the sales:

Earlier this week, we announced the initial steps in McDonald’s business turnaround plan. We are moving quickly to deliver a better experience to our customers and to realize our vision to become a modern, progressive burger company. While our current performance reflects the significant work ahead, I am confident that we’ve taken the first critical steps toward positioning the company for long-term profitable growth.

Note that systemwide sales for the month decreased 8.8%, but these sales increased 1.5% in constant currencies.

Shares of McDonald’s were up 1.3% early Friday, at $98.01 in a 52-week trading range of $87.62 to $103.78. The stock has a consensus analyst price target of $101.18.

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