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McDonald's (MCD) Feels Comparable-Sales Strain

Stocks in this article: MCD

NEW YORK (TheStreet) -- Retailers weren't the only ones having a tough time drawing crowds over Christmas. McDonald's (MCD), the fast food heavyweight, also had trouble moving its Big Macs and Happy Meals. Though the world's largest restaurant chain reported higher fourth-quarter and full-year revenue, decreasing same-store sales indicate patrons are choosing to eat out at alternatives.

Global comparable sales decreased 0.1% over the fourth quarter, but increased 0.2% in 2013. While overall comps appear fairly flat, digging into the details reveals a mixed bag.

In the U.S., comparable-store sales over the fourth quarter declined 1.4%, compared to a 0.7% increase over the third quarter. The results show a far steeper drop than estimates provider Consensus Metrix had anticipated, forecasting a mere 0.2% fall. Fewer customers on home turf indicate strategies to perk up sales, including the expansion of Dollar Menu & More offerings and limited-time options, have failed to make a dent.

"Looking ahead, the segment is intent on optimizing current initiatives by strengthening its focus on menu choice, customer engagement and operations excellence to drive sales and profitability," the company noted in a statement.

Fourth-quarter comparable sales in Asia/Pacific, Middle East and Africa (APMEA) continue to be the laggard, falling 2.4% over the quarter, a wider loss than the 1.4% decline seen over the third quarter and the 1.3% drop expected by analysts. The company said the declines reflect weakness in Japan and flat performance in China and Australia and that a focus on accelerating growth across its day menu would aim to rectify declining sales.

Meanwhile, in Europe fourth-quarter comparable-store sales increased 1%, as strong performers U.K., Russia and France offset weakness in Germany. However, analysts had expected slightly stronger growth of 1.1%.

"As we begin 2014, global comparable sales for the month of January are expected to be relatively flat. While near-term challenges remain, we are intent on strengthening our brand to further differentiate McDonald's and become an even bigger part of our customers' lives," said CEO Don Thompson in a statement Thursday.

For the fourth quarter, the chain reported net income of $1.40 a share, beating Thomson Reuters' estimates by a penny, and coming in 1% higher than the year-ago quarter. Revenue of $7.09 billion, though a 2% year-over-year increase, missed consensus by $22 million.

Over fiscal 2013 ended December, the Oak Brook, Ill.-based business recorded net income of $5.55 a share, in line with expectations, and revenue of $28.11 billion, $18 million lower than consensus.

Hoping to regain its consumer appeal, the hamburger chain announced Thursday it has appointed Deborah Wahl as its new chief marketing officer. Wahl most recently helmed marketing at homebuilder PulteGroup (PHM) and has also held senior marketing roles at Chrysler and Lexus.

By market open, shares had slipped 0.08% to $94.80.

TheStreet Ratings team rates MCDONALD'S CORP as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate MCDONALD'S CORP (MCD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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