Memo to McDonald's: Fix the Reporting!
It’s happened again: McDonald’s (MCD) weak same store sales results for October announced today threatened to take down the entire restaurant space stock platform.
To be sure, McDonalds was weak (minus 1.8% worldwide). Weaker than most expected. Wendy’s (WEN) same day reported plus 2.7% system same store sales and Burger King Carrols (TAST) reported a strong plus 6.2%, and an ‘OK trend’ thus far in October. What was of greater concern were the MCD sales components: with some analysts projecting an embedded 3% price increase in the US, either customer traffic was almost 5% lower or product mix shifted lower.
McDonald’s sales momentum deterioration in the US and Europe was the most pronounced. APMEA (rest of world) had poor Japanese trends and bouncing Australian results, has been weak or negative for some time. The MCD powerhouse markets of France and Germany had to be down big time as MCD reported the UK was up.
One of the problems is MCD reports by calendar month. But not every month has the same number of weekdays and weekends each year, and MCD missed a Saturday and a Sunday this year.
This could be fixed. Fiscal year formats of 13 periods of 28 days have been standard for 30 years plus in this space and could so be adopted. Every backoffice system in the world has such flexibility.
I suspect the problem is getting franchisee reporting lined up. It’s a change and will cost something. But we expect such systems from the QSR industry pioneer. And less stress on the publicly traded company is good for all.
Finally, while the same store sales metric is commonly understood in the business press, comparing to one prior year is not really the best measurement. It misses cumulative history. McDonalds was down versus 2011, but still up versus 2010, 2009, 2008, and so forth, likely all the way back to 2003. Wendy’s and Burger King do not have the same advantage. Additionally reporting same store sales on a five year compound average growth basis could be more meaningful.