MCD Stock Slumps as McDonald’s Declares Breakfast War

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McDonald’s (MCD) hit a 52-week low this week, pushing its stock down to a 5% loss so far in 2014 vs. a gain of about 8% for the S&P 500.

The reason was the fast food titan’s August same-store sales figures, which fell 3.7% globally. Worse, MCD stock showed a precipitous 14.5% drop in the Asia/Pacific, Middle East and Africa territory.

Competition in the fast food industry has always been cutthroat, but in recent years competition has intensified between McDonald’s and rivals like Wendy’s (WEN), Burger King (BKW), and Yum Brands‘ (YUM). With MCD stock feeling the pressure, the iconic company returned to a tried-and-true formula that’s worked like a charm for decades on end: throw a “Mc” in front of a word, put it on your menu, and hope for the best.

Ladies and Gentlemen, welcome to the age of McBrunch.

McDonald’s Brunch – Will It Help MCD Stock?

MCD stock mcdonalds mcbrunch trademark august comps mcd 52 week low

While MCD stock desperately needs a boost to defend itself against the fast food chains nipping at its heels, August’s comparable-store sales figures are worrisome. It’s nothing new for investors that sales growth at McDonald’s is in jeopardy, but a clear downtrend in sales is not at all something shareholders will tolerate.

When you buy MCD stock, you’re buying a mature business, and you have the right to expect consistent results from one of the strongest brands on planet earth.

Instead, McDonald’s Asian business has suffered severe setbacks recently as a result of unexpected food quality issues, driving down sales in Asia. Due to problems with Chinese meat suppliers, the company was forced to temporarily yank meat products entirely from its menus in July.

Meat products! That’s a big part of McDonald’s business, and subsequently, a large chunk of the value of MCD stock was destined to disappear with all that pork, beef, and chicken.

On top of that, MCD’s competition isn’t letting up. Yum Brands’ Taco Bell came out of left field this year by introducing a breakfast menu, a move that is pretty much analogous to an act of war in the fast food industry. If that wasn’t enough, Taco Bell launched an ad campaign replete with real-life guys named Ronald McDonald who simply did not care for Mickey D’s breakfast menu, certainly not after Taco Bell’s paradigm-shifting, stomach-filling, palate-pleasing offerings hit the market.

MCD stock has fallen on tough times. But McDonald’s will recover from its debacle in Asia, and it appears to be going on the offensive with its McBrunch trademark.

If McDonald’s comps continue to wane in the coming months, investors will have serious cause for concern. But in the meantime, MCD stock pays a nice 3.4% dividend and trades at a modest multiple. It might be time to take a bite out of the stock and buy into the McSellof!

As of this writing, John Divine did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/mcd-stock-mcdonalds-yum-bkw/.

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