Save the Economy: Eat a Big Mac

   

McDonald’s (MCD) has reported that same store sales in February jumped 4.8%. US sales rose 0.6%, European sales increased 5.4%, and Asia/Pacific, Middle East and African sales climbed 10.5%. That pretty much clears up where the sales are.

The weak report for the U.S. is blamed on the weather and on high unemployment, especially among young men and minorities. Remember when we used to blame only the weather on the weather. Now, we blame it for everything — low food sales, high natural gas prices, low airline traffic, you name it.

The situation with unemployment, however, is difficult to argue away. The conventional wisdom here is that as economic times get more difficult, diners spend less on eating out, except at low-priced stores like McDonald’s, Wendy’s/Arby’s (WEN), and Taco Bell/KFC/Pizza Hut owner Yum! Brands (YUM).

But if the economy is recovering, consumer spending should be rising and fast-food chain revenue should be moderating as diners return to their old, more expensive haunts. That’s not what’s happening now.

People are still eating at the low-cost chains, even as economists and politicians claim that the economic recovery is taking hold. Maybe people like Big Macs and plan to stick with them. Or, maybe consumers didn’t get the memo on the recovering economy.

US same-store sales at McDonald’s rose 1% in December 2009 then fell 0.7% in January before recovering a bit in February. After December’s report, McDonald’s CEO predicted that the results were “sustainable.” That does not appear to be exactly the way it has worked out.

McDonald’s breakfast sales have been estimated to account for 25% of sales and 35% of revenues. If you are unemployed, will you be stopping by the drive-in window for a breakfast sandwich on your way to work? Probably not.

The company notes that it is seeing strong demand for its Breakfast Dollar Menu, among other things. McDonald’s also offers low-priced value meals for around $3. And while the company doesn’t provide a break-out of what its customers are buying, it does note that February sales were aided by its Winter Olympics-related promotion.

For the past three months, McDonald’s sales have been essentially flat in the U.S. If fast food sales are any kind of bellwether for the U.S. economy in general, then the economy is not getting any worse. Then again, it’s not really getting any better either.

Tell us what you think here.

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Article printed from InvestorPlace Media, http://investorplace.com/2010/03/mcdonalds-mcd-same-store-sales-fast-food-stocks/.

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