McDonald’s Corporation (NYSE:MCD) has decided to stop reporting monthly same-store sale data effective July 1, hoping that investors will take the change as an instance of “no news is good news.”
This means after June 1, investors may only learn about McDonald’s same-store sale data during quarterly earnings announcements, or four times during any fiscal year, down from 12 times when MCD issued sales numbers monthly.
The investment community has long relied of these types of monthly reports to gauge overall spending trends at McDonald’s. Not to mention, the metric gives investors a sense of a company’s financial health and whether to buy/sell or hold MCD stock.
The question, then, is what does MCD gain from being less transparent? Does this move help MCD stock in any way, or does it simply betray a lack of confidence in the company’s ability to improve same-store sales?
MCD Is Making the Right Moves
McDonald’s global same-store sales at restaurants have declined for 11 consecutive quarters through April. The company has found no answer to the dominant growth seen from the likes of Chipotle Mexican Grill, Inc (NYSE:CMG) which has grown same-store sales at mid double-digits for six consecutive quarters.
And with MCD stock climbing just 13% in three years, against 50% gains for the Dow Jones Industrial Average, MCD felt it was time to change the narrative. CEO Steve Easterbrook said:
“Disclosing comparable sales as part of our quarterly reporting is consistent with nearly all retailers and will provide a greater understanding of McDonald’s sales results in the context of the company’s overall financial performance.”
This is one of many changes Easterbrook has enacted since taking over as CEO in March. In fairness, MCD is not alone. Among other retailers that have ended monthly reporting includes Wal-Mart Stores Inc (NYSE:WMT), Target Corp (NYSE:TGT) and Starbucks Corp (NASDAQ:SBUX). For what it’s worth, both Target and Starbucks shares are trading at near 52-week highs. No one’s questioning their decisions to stop reporting sales data each month.
And as for Walmart, WMT stock is down more than 12% on the year and has traded flat over the past 12 months. Obviously, the world’s largest retailer and MCD, the world’s largest restaurant chain, have their own set of problems. In McDonald’s case, it wants to become more focused on its longer-term turnaround plans and not expose itself too much during what may appear to be slow recovery.
Sure, the company has shot itself in the foot a few times. And it certainly doesn’t help that there’s the overhang of wage disputes and disagreements with its franchisees. So adding fuel to the fire by giving the press horrible data each month is something MCD feels it doesn’t need. And frankly, I think it’s a good move. McDonald’s, whose goal is to become a “modern, progressive burger company,” wants to better control how it is perceived. And that makes perfect sense.
Moreover, this change should add some stability to MCD stock. It will lessen the pressure on monthly results and force investors to buy into the long-term vision that Easterbrook has established. The details of that vision include various cutting costs measures, selling restaurants to franchisees and a comprehensive business unit reorganization.
MCD stock will become a long-term investment, rather than trade bait. While the company is still in the early stages of its turnaround, that MCD stock pays an annual dividend yield of 3.45% makes it worth the wait. And it’s also worth waiting three months for its same-store sale data.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
