The woes of McDonald’s Corporation (NYSE:MCD) stock are almost certainly not over.
Today, the fast-food giant disappointed Wall Street for the umpteenth time, announcing global same-store sales that fell 1.8% in January. MCD stock fell just over 1% on the news; shares are now down about 3% in the last year.
Over the same time, the benchmark S&P 500 is up nearly 14%, making that 3% loss even lousier than it sounds to begin with.
Unfortunately, today’s news is just more of the same from Ronald & Co., and it’s hard to see any reason to dispute the fact that MCD stock is a sell.
MCD: Same-Store Sales Isn’t A New Problem
Decelerating or declining same-store sales have been plaguing MCD since 2012. After briefly seeing same-store sales growth rise to the double digits in 2012, comps have been trending viciously lower for the past few years.
The chart below, courtesy of Business Insider, illustrates this trend in all its horror.
Click to Enlarge This depressing chart is a major reason former MCD CEO Don Thompson stepped down a few weeks ago. You won’t win many friends on the board if customers revolt against Big Macs during your tenure.
To be fair, the general decline of Mickey D’s isn’t all Don Thompson’s fault. A slew of competitors ramped up clever promotions, attacked McDonald’s directly and entered the breakfast business. From Wendys Co (NASDAQ:WEN) to Jack in the Box Inc. (NASDAQ:JACK) to Burger King Worldwide Inc (NYSE:BKW) and even private companies like Five Guys Enterprises, LLC.
Taco Bell — owned by Yum! Brands, Inc. (NYSE:YUM) — even went toe-to-toe with MCD in a video campaign featuring scores of real people named Ronald McDonald happily feasting on Taco Bell Waffle Tacos and declaring their love for Taco Bell’s new breakfast menu.
The rising popularity of fast-casual places like Chipotle Mexican Grill, Inc. (NYSE:CMG), Panera Bread Co (NASDAQ:PNRA) and El Pollo LoCo Holdings Inc (NASDAQ:LOCO) hasn’t helped MCD stock either.
But the real lingering reason Mickey D’s keeps reporting same-store sales declines is something internal. A surprise audit of a Chinese meat supplier last year revealed extremely unsanitary conditions: video shows workers picking up meat from the floor and mixing expired meat in with good meat, according to Reuters.
MCD stock won’t have much reason to take off until the blowback from that event starts to wane, and it hasn’t. In January, same-store sales in the Asia/Pacific, Middle East and Africa (APMEA) region were down a horrific 12.6%. In October and November of last year APMEA same-store sales were down 4.2% and 4%, respectively. Each time, APMEA performed worse than McDonald’s other main geographical segments, the U.S. and Europe.
If there’s a silver lining to January’s numbers, it was in the U.S. — McDonald’s biggest market — where same-store sales eked up by 0.4%.
That’s great and all, but we live in a global economy and just because MCD stock appears to be on the value menu doesn’t mean it’s a buy. In fact, sell MCD while you can before the insatiable Hamburglar starts fueling his beef addiction with your hard-earned money.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.
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