McDonald’s Corp. (MCD) has maintained its impressive run of posting solid comparables sales results, driven by its value offerings, premium products and growing global footprint. Global comparable sales of the company grew 6.7% in January, on the heels of strong sales of beverage and core menu products. Comparable sales growth also climbed from 5.3% in January 2011.
The fast-food restaurant operator witnessed an uptrend across its domestic and international markets on a year-over-year basis. Geographically, United States was the major contributor to the month’s growth followed by Asia/Pacific, Middle East and Africa (APMEA) region and Europe.
In the United States, comps growth of 7.8% was higher than 3.1% recorded in the year-ago period. Growth in average unit volume comes from three primary segments: breakfast, chicken, and beverages. The comps of January 2012 benefited from the limited-time offering of Chicken McBites and McCafe beverage line up. Core offerings like Chicken McNuggets, breakfast menu as well as everyday value options were the other major contributors in the month.
Europe saw a growth of 4.0% as opposed to 7.0% in January 2011, due to the prevailing uncertain economic environment. The growth was primarily attributed to stronger performance in the U.K., France, Russia and Germany. Locally relevant menu choices, sustained focus on multiple-tier menu offerings and a restaurant reimaging program were responsible for continued market share gains.
Driven by healthy performance in China thanks to the timing of the Chinese New Year and many other markets, comparable sales for the month of January jumped 7.3% in APMEA as against 5.2% in January 2011. Continued focus on daypart value options, limited-time food events and great customer service contributed to the strength.
The Oak Brook, Illinois-based company’s system-wide sales increased 8.4%, or 9.1% in constant currencies, in the month under review.
Comparable sales of McDonald’s have been on the rise in the recent months and steady growth in the U.S. clearly indicates the return of consumer confidence in the country. To boost sales in the U.S., McDonald’s is also planning line extension and new flavors as well as promotional food events. The Cherry Berry Chiller will be rolled out in 2012. The company will also add blueberry banana nut oatmeal.
We also remain impressed as business in Europe is not substantially affected by the implementation of austerity measures and reduced social support. However, with the economic challenges not getting over soon, we expect the business in Europe could slow down going forward.
We expect the comps to remain strong for the month of February as well benefiting from the leap year day.
McDonald’s currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. The company’s competitors includes Yum! Brands Inc. (YUM).
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