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VIDEOSilver Lining: McDonald's is King
Dollar Menu has global comps way up.
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As evidence, take a gander at the chain’s sales numbers for January.
Global comps in the period were up 7.1%. And although domestic consumers have, as we pretty much all know, maintained a death-grip on their wallets, comps were up a healthy 5.4% in the land of milk and honey.
One word: Wow.
Those are some big numbers that I suspect that many fast-food and casual-dining chains would all but kill for these days.
I think what makes these numbers particularly delectable is that in the same period last year, the company posted global and US comp gains. In other words, it wasn’t going up against some Bush-league comparison.
While I’m tempted to think the playground equipment is to thank for at least some of its foot traffic (I know my kids can’t get enough of it), Mickey D’s has some other things going for it as well.
For one, the “Dollar Menu” - which has just got to be drawing a lot of interest these days from cost-conscious consumers. Not to mention its coffee, which is undoubtedly giving Dunkin' Donuts and Starbucks (SBUX) a run for their money.
I think there was this sentiment that McDonald's was the place to play in this space, and these numbers simply reinforce that.
Also think about the alternatives in fast food.
You’ve got Burger King (BKC). I like them - and the company is trading at about 13.2 times the current-year estimate. But it's possible people will go for the top banana: McDonald's trades at just 15.5 times the current-year estimate.
You know the saying your mom taught you - "You get what you pay for"?
You’ve also got Yum! (YUM), which is famous for its KFC and Taco Bell brands. But at the end of the day, can they keep up with Mickey D’s?
I don’t think so. When my friends and family have a hankering for good, albeit cheap eats, I don’t think I’ve ever heard them say "Let’s hit Taco Bell."
What about Wendys/Arbys Group (WEN)? I’d call them the “dark horse” play here because I don’t think the investment community is expecting too much from them. They seem to have too many balls in the air and I’m not willing to get involved.
As for chains with traditional waitstaff service, there are some companies that I do like out there. At the same time, I think they could remain in the deep fryer in the near-term. I hate to say it, but I think there’s a reluctance to go to those types of places because few want to drop 10%-20% or more of the tab on gratuity.
Hold your emails - I don’t work for McDonalds. In fact, I want to make clear my number one concern: By turning in numbers like this it, it sets the bar super high. And going forward, it might be hard to post repeat performances.
Incidentally, the release offers up the following line from Jim Skinner, its chief executive, that I found interesting:
“We are pleased with comparable sales performance around the world. For the month of February, it's important to note that comparable sales will be negatively impacted by about 4 percentage points as prior year results included one extra day due to leap year. This compares with a calendar shift benefit of about 2 percentage points in January.”
That’s totally understandable, but will investors remember that when the numbers come out?
Hey - have a great day!
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