McDonald's Stock Falls From Grace As Analysts Fret About Growth

International Business Times

Published Jul 24, 2014 06:10AM ET

Updated Jul 24, 2014 06:30AM ET

McDonald's Stock Falls From Grace As Analysts Fret About Growth

By Alroy Menezes - As McDonald's Corporation (NYSE:MCD) continued to see its sales suffer in main markets such as the U.S., Germany, Japan and Australia, market analysts downgraded the fast-food giant's stock on Wednesday, after the Illinois-based company posted a disappointing second-quarter profit, according to MarketWatch.

With this year’s turnover looking bleak, McDonald’s CEO Don Thompson evoked a sense of urgency in a conference call with investors on Tuesday, when he reportedly said that a substantial improvement in sales and customer visits won’t come any time soon. Fortunes in the restaurant business look bleak nationwide. According to MarketWatch, which cited data from the NPD Group, customers in the U.S. made about 61 billion visits to restaurants in the year until May 2014, down by about 1.3 billion visits from pre-recession traffic levels.

“There are some fundamental shifts in how consumers, particularly low- and middle-income consumers, address their discretionary spending,” Bonnie Riggs, an industry analyst at NPD, said.

McDonald’s, which is the world's leading fast-food company, has seen a consistent slide in global market share, which has fallen to 13.7 percent in 2013 from a peak of 14.6 percent in 2009, the report noted, citing data from Euromonitor. 

McDonald’s sales in the U.S. slipped 1.5 percent as people with smaller incomes reduced eating out or instead choose cheaper menus even as well-heeled customers picked other options like Chipotle Mexican Grill Inc (NYSE:CMG), which saw its second-quarter sales grow by 17 percent, the report said.

“Similar to the stalled growth other retail sectors are experiencing, restaurants are being negatively impacted by a large segment of the population who are watching their discretionary spending closely. Going to a restaurant is a nice-to-have and not a need-to-have,” Riggs reportedly said.

Fewer market analysts now rank McDonald’s shares a "Buy" with only 29 percent recommending investment in the stock -- the lowest level in five years -- according to FactSet data, cited by MarketWatch.