NEW YORK (TheStreet) - If you look at the market reaction to both McDonalds (MCD) and Starbucks (SBUX) after their quarterly reports today (McDonalds before the open and Starbucks after the close), the muted stock reaction could make you think these were similarly looking quarters. But that was not the case at all. </p>
The McDonald's report was point blank disappointing. The US ended the year with December same store sales down 3.8%. The stock didn't go down because, well, the stock has done nothing for a year - up just 9% in 2013, well underperforming the market. On the other hand, Starbucks--which surged 46% in 2013--is consolidating amidst macro uncertainty but reiterated very strong long-term growth drivers.
The contrast between McDonald's and Starbucks is an interesting case study, because they are both huge global chains. Both have struggled in the past to match growth and value. Between 1997 and 2002, we saw the decline of McDonalds as the company focused on building new stores instead of focusing on customer satisfaction. The company turned itself around by focusing on identity. The same thing happened to Starbucks in 2008 when the chain got too caught up in expansion and lost the Danny Meyer focus on the customer--just before Howard Schultz returned as CEO and focused again on image.
But, the difference between the two companies now? Starbucks, under Schultz, learned to right the ship in terms of value and then jumped back into growth - focusing on international opportunities, new channels--including juice, snacks, and tea, consumer products, and health & wellness. The latest Starbucks quarter reflected superior performance in amidst worrisome spending period. While the Americas comps of 5% were below the 15 consecutive quarters we have gotten above 7%, the number is still double the comp growth of peers. EMEA recovered, with Starbucks delivering a 5% same-store-sales growth figure for the region--the strongest performance in over 3 years. The CAP region saw comps up 8% and, importantly, Schultz re-emphasized China as a growth engine for the company. Plus, Schultz is anticipating and acknowledging the shift to online by emphasizing gift cards in particular--being proactive and making dynamic choices and changes.McDonald's hasn't embraced innovation to even a fraction of the degree, and that is showing up in its results. The company is suffering from lack of compelling new products, a menu that is too complicated, and poor execution. Results in Europe, with same-store sales up 0.5% in December, also came in below estimates. And APMEA saw a decline of 2.1% in same-store sales.