Micky D's (MCD) finally served up something palatable: strong sales. It trounced Wall Street expectations, leaving investors in most sit-down eateries with that "duuuh" look on their face.
Third quarter revenue sank 10.4% year-over-year but topped consensus estimates, while earnings of $1.76 per share came up a penny short of analysts' expectations.
So where's the blowout? McDonald's may have seen sales fall, but operating income soared 44% in the quarter. Additionally, comparable-store sales results remain strong, with 6% growth vs. estimates calling for 4.5%. Comp-store sales in the U.S., international and high-growth markets each exceeded expectations as well.
In a nutshell, McDonald's is delivering and its stock is up 43% over the last 12 months as a result. But what companies are coming at the expense of McDonald's resurgence?
Many would immediately think of other fast-food stocks, like Wendy's (WEN) (which also owns an 18.5% stake in Arby's) and Restaurant Brands International (QSR) , which owns brands like Burger King, Tim Hortons and as of late-March, Popeyes Louisiana Kitchen.
- It's Hard to Work Up an Appetite for Chipotle and Most Restaurant Stocks
But ironically, both of these companies are doing well. Wendy's stock is up 39% over the past 12 months, while Restaurant Brands International stock is up almost 42%. Yum Brands (YUM) , which owns brands like Taco Bell and KFC,hasn't had the easiest time. But since it spun off Yum China (YUMC) , things have been going pretty well for them, too.
So who are the laggards? Starbucks (SBUX) hasn't had a very easy time, struggling to generate comp-store sales growth in the U.S. thanks in part to the debacle surrounding its Mobile Order & Pay platform. But shares are only flat over the past year. Domino's Pizza (DPZ) has also stumbled, but not fallen. Shares are up about 10% over the past year, but are down almost 20% from the highs.
Don't even get us started on Chipotle Mexican Grill (CMG) , which may be suffering more from self-inflicted wounds than anything else.
But maybe it's not the fast-food for fast-casual food sectors that are coming under pressure from McDonald's. After all, if Burger King and Wendy's are still doing OK; it must be another industry under pressure. Look no further than sit-in dining.
Over the past year, Cheesecake Factory (CAKE) is down 14%, Buffalo Wild Wings (BWLD) is down 24% and Ruby Tuesday (RT) , despite being bought out, is still down 23%. Fogo de Chao (FOGO) and Noodles (NDLS) are down 3.5% and 4.3% respectively. Although over the last two years they are down 28% and 67%, respectively.
DineEquity (DIN) , which owns brands like Applebee's and IHOP, is down 41%, while Brinker International (EAT) , which owns brands like Chili's and Maggiano's, is down 40%. On the plus side, if we can call it that, Bloomin' Brands (BLMN) , with brands like Outback, Fleming's and Carrabba's, is up 1%.
Zoe's Kitchen (ZOES) is down 44%.
So what's the pitch? McDonald's isn't crushing its peers. In fact, the fast-food industry is pressuring (but not crushing) fast-casual options like Domino's and Starbucks, but is absolutely eating the lunch of sit-down restaurants. The question is, how long will that trend continue, as consumer appear fine with opting for more convenient options over timely sit-down alternatives.
- Dominos and Wendy's Are Kickin', Thanks to Millennials
- With an Activist Hovering, Embattled Ruby Tuesday Sells to NRD for $335 Million
McDonald's international offerings are...interesting...to say the least:
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.