McDonald's same-store sales grew to the highest in six years, but why did the share price hit its biggest 4-month decline?

Source: Internet
Author: User

McDonald's has spent three years turning to profitability, but investors want more.

January 30, McDonald's released Q4 earnings, although the United States and store sales reached the expected, but the share price hit the biggest decline in 4 months. Mike Halen, Bloomberg analyst, Maik Halen that McDonald's valuations are far higher than its rivals, and investors believe that McDonald's same-store sales should be far more than expected rather than flat.

According to earnings, McDonald's Q4 total revenue fell 11% to 5.31 billion dollars as it sold its own restaurants to franchisees, with operating income up 9% to $21.44 a year. McDonald's global same-store sales grew 5.5% per cent year-on-year, the highest in six years, with local sales up 4.5% per cent in the US quarter, slightly above analysts ' expected 4.3%.

The growth in McDonald's 's local sales in the four quarters was mainly based on discounts, including the continued offer of special drinks and packages. McDonald's will continue its discount strategy in the first quarter to attract more customers with a dollar package.

But investors worry that the discount package will not work too long, the fast-food price war has begun, and McDonald's rivals, such as Taco Bell, are also offering discounted products. "Investors have a lot of expectations for 1 of dollars, 2 dollars and 3 dollars in value menus, and if it doesn't work, then McDonald's shares will fall," says Edward Jones, an analyst. ”

In addition, the price war will also deplete the company's profit margin. GlobalData Retail's managing director, Neil Saunders, said in a study that low-cost packages would shift consumers ' attention away from normal and high-priced packages. It should be noted that McDonald's a dollar package earlier had been opposed by some franchisees.

In addition to the discount package, McDonald's needs more ways to balance the flow of traffic and profits, otherwise the future earnings will not look too good, and that is why McDonald's shares will fall after earnings. McDonald's CEO Easterbrook said in a statement that the company's profitability could be maintained through a fast-pace, diversified menu and price mix.

After the sale of China's McDonald's franchise, the U.S. market will be the focus of exerting power. McDonald's CFO Kevin Ozan said that in 2018, McDonald's planned to invest about 2.4 billion dollars to open 1000 new restaurants and upgrade existing store facilities in North America.

In the middle of this year, McDonald's will also expand the supply of fresh beef burgers. Last year, the more expensive, but healthier, handmade beef burger was launched, pulling three restaurants in Dallas to increase their burger sales by 20% to 50%. On the one hand to maintain low-cost fast food, on the other hand set up the image of consumption upgrade.

In addition, Easterbrook also believes that the new app and delivery services can maintain customer loyalty. In May 2017, McDonald's cooperated with UberEATS to further develop its takeaway business, which allowed McDonald's to reach a number of new consumers, especially young people and residents living in suburban areas.

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