Sometimes even a value meal doesn't cut it. McDonald's comparable sales for November showed weakness globally, even though the fast-food chain has generally succeeded in winning market share in the slump. US sales unexpectedly fell, as rising unemployment hit breakfast sales in particular and rivals ramped up cut-price marketing campaigns. Previously strong European sales managed only 2.5 per cent growth, half what was expected. And despite their positive macroeconomic gloss, emerging market sales contracted.
Adjust for the number of trading days month-to-month, however, and underlying trends look broadly similar to October, Deutsche Bank points out. In Asia, last November's 13 per cent growth set a high bar to beat. But another poor month in China, where McDonald's is a more upmarket choice than on home turf, suggests consumer confidence is lagging improvements in output – particularly in the coastal regions where McDonald's has many of its restaurants.
That softness means McDonald's will open only 140 stores in China this year, not the expected 175. But that should leave it with opportunities ready to go as the Chinese rediscover their taste for Big Macs. Meanwhile, the company expects to remodel about 800 US stores in 2010, about double its haul this year. Only about 40 per cent of its US restaurants have had the treatment since 2003, associated with a significant sales uplift. That could help keep the Golden Arches competitive. Trading at a little below 14 times 2010 forecast earnings, McDonald's shares – which have gone sideways for two years – are close to the bottom end of their historical range. Those doubting next year's prospects should take comfort in a historically high dividend yield. After yesterday's sell-off, McDonald's stock looks a decent-value bite.