(MCD) McDonald’s Corporation’s Sales Barely Rise

McDonald’s Corporation’s (MCD) comparable sales for November 2009 showed sluggish growth of 0.7% as against a rise of 7.7% in the same month last year, exposing its sensitivity to rising unemployment, the economic downturn and the discount war among fast-food chains to lure consumers.

The company faces stiff competition from Burger King Holdings Inc. (BKC), Wendy’s/Arby’s Group, Inc. (WEN) and Yum! Brands Inc. (YUM). However, these quick-service operators are faring better than casual dining restaurant chains, such as Cosi Inc. (COSI) and Red Robin Gourmet Burgers Inc. (RRGB), as cash-strapped consumers are trading towards fast-food centers due to relatively cheap dining options.

System-wide sales at McDonald’s worldwide restaurants climbed 10.1% in November. However, in constant currencies, the rate of increase in system-wide sales dipped to 2.3%.

In the United States, comparable sales dropped for the second straight month. Comps dipped to 0.6% in November (versus a 4.5% increase last year for the comparable month) after falling 0.1% in October. However, the month’s result fared better than the overall quick-service restaurant industry. Value-menu items and premium menu options continued to support the month’s results.

In Europe, comparable sales climbed 2.5% in November (versus a 7.8% increase last year for the comparable month) fueled by strong performance in the U.K. and France, partially offset by performance in Germany. Sustained focus on fourth-tier items development, premium menu options, and daypart expansion contributed to sales.

Comparable sales in Asia/Pacific, Middle East and Africa (APMEA) dropped marginally by 1% in November (versus a 13.2% increase last year for the comparable month) reflecting weakness across Japan and China, but partly offset by Australia.

Zacks Investment Research

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