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McDonald's Same Store Sales Dissapoint

This morning, McDonald’s (MCD) reported that its August same store sale for units open at least 13 consecutive months rose 3.5%.  Apparently this was such a poor result that the stock is getting sent lower by about 4% in the early part of the trading day.

Expectations were higher. However, those expectations were varied by information source and are only based upon a handful of analysts. For example, Thomson Reuters’ poll expected a 4.3% increase while the Bloomberg poll of seven analysts expected a gain of 5.0%. I do not exactly consider these polls to be accurate or scientific.

By geography, same store sales rose 3.9% in the US; 2.7% in Europe; and were lower by 0.3% in Asia/Pac, Middle East & Africa. The drag in Asia/Pac came from Japan where post-tsunami economic conditions continue to be challenging.

Total global sales for MCD in August rose 11.3% for the month on a GAAP basis and 5.4% in constant currency. Year to date sales for MCD rose 11.6% on a GAAP basis and 6.3% in constant currencies. Year to date comps are 4.7% versus 4.9% in the same period of time a year ago. None of those results give me reason for concern.

This is a case where analysts expectations, if they even have any credibility, were too high and did not consider the impact of hurricanes in the USA and the continuing impact of the Japanese tsunami. How can you be disappointed with a restaurant or retail company that pumped out 3.5% cops in August given all that is happening around the world in economic terms?

For long term investors, you are getting a gift from the market today. With the stock off about 4% you have a great entry point for a new position or to add to existing positions.  The yield is now 2.87% and I expect the dividend to be boosted by 10% in the next few weeks.

Disclosure: At the time of this blog entry Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long MCD stock — although positions can change at any time.

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

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