uploads///Same Store Sales Growth

McDonald’s Same-Store Sales Growth Continues Slide in 1Q15

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Apr. 24 2015, Published 4:50 p.m. ET

Declining same-store sales

McDonald’s (MCD) same-store sales growth in its major market, the US, continues its declining trend. In the last part of this series, we learned that McDonald’s EPS (earnings per share) declined 16.5% YoY (year-over-Year), which is a result of this negative same-store sales growth trend.

McDonald’s (MCD) revenues declined 11% YoY. Revenues in a restaurant industry are primarily driven by same-store sales and unit growth. Global same-store sales were down 2.3% YoY from 0.5%. McDonald’s reports its same-store sales growth under four segments, as you can see in the chart below.

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The US

During the quarter, McDonald’s management simplified the menu in the US and improved operational efficiencies. However, same-store sales in the US declined 2.6% in the first quarter, down from -1.7% in the corresponding quarter in 2014. With an operation the size of McDonald’s, any changes will take time to show.

Europe

Same-store sales disappointed in Europe as well, declining by 0.6% instead of growing by 1.4% the way they did in the corresponding quarter a year ago. During the earnings call, management said that the German market’s negative same-store sales growth has moderated. Meanwhile, management blamed low customer confidence and difficult macroeconomic conditions in France and Russia for less-than-robust same-store sales.

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The Other Countries & Corporate segment

Same-store sales growth in this segment was positive, with a growth of 10.4%. In the corresponding quarter a year ago, same-store sales grew by 6.9%.

Asia-Pacific, Middle East, and Africa

The APMEA (Asia-Pacific, Middle East, and Africa) market experienced the biggest decline, reporting same-store sales of 8.3% compared to 0.8% in the same quarter a year ago. Same-store sales growth was dragged down by markets in Japan and China, which experienced a decline of 32.3% and 4.8%, respectively.

This market continues to be affected by the meat-supplier scandal, which also affected Yum! Brands (YUM), Burger King (QSR), and Starbucks (SBUX). SBUX makes up 3% of the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY has 4% of its portfolio holdings invested in MCD. The ETF also invests in fast-casual restaurants such as Chipotle Mexican Grill (CMG), which makes up 1% of XLY.

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