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McDonald’s: Investors Are Lovin’ It


Image source: nafterphoto / Shutterstock.com

What's going on?

Yum yum. McDonald’s stock jumped 3% on Friday after it reported that its sales grew more than expected. It was thanks, primarily, to a big pickup in sales outside of the US.

What does this mean?

Global sales grew by 3.5%, much higher than the 1.5% growth that was expected, while US sales were in-line with expectations at 1.3%. The company didn’t really attribute the international performance to much beyond saying that there was strength across the board (except in China, where anti-US protests hurt sales). But the relatively strong performance gels with an overall plan to reinvigorate McDonald’s, which began about 18 months ago when a new CEO was hired.

Why should I care?

The bigger picture: Even burger joints are becoming tech companies.

A big part of McDonald’s plan for future growth is to improve its in-store experience (and increase its efficiency) by implementing things like self-order kiosks and a mobile app. McDonald’s calls this the “experience of the future.” Expect it to be mimicked by other fast food restaurants and coffee chains (like Starbucks).

For the stock: It’s about to get a lot tougher for McDonald’s to increase its sales.

About a year ago, McDonald’s introduced all-day breakfast in the US. The impact on sales was much more positive than many thought it would be. The problem, however, is that it’s now tougher to grow sales going forward (remember, sales growth is typically compared to the same quarter one year before). Improved technology will help – as will rolling out some of the successful US initiatives, like all-day breakfast, in other countries – but investors are bracing for declining growth (which is one reason why its stock is still 13% down from its peak price, which it reached earlier this year).

Originally posted as part of the Finimize daily email.

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