Weekly Notes On Restaurant Industry: McDonald’s & Dunkin’ Brands
With just a couple months gone in the new fiscal year, the U.S. restaurant industry is gearing up for another year of tough competition in the first calendar year quarter. Last year, harsh weather conditions resulted in declining customer traffic in the breakfast daypart. As a result, most of the top fast food chains, and other restaurant chains, found it hard to sustain their comparable store sales growth. According to Black Box Intelligence, a financial performance research group for the restaurant industry in the U.S., restaurants showed improved performance in the month of January, as their increasing momentum in the last couple of months strengthened. Moreover, relatively mild weather conditions, cheaper gas, and a stable economic environment in the U.S., are being considered as the reasons behind the increased sales and traffic. However, the situation might change in the coming few months, as commodity inflation might also impact the businesses. Prices of beef and other meat products are expected to remain higher in 2015. This might force the companies to raise their menu prices.
Here’s a quick round up of the restaurant companies covered by Trefis.
McDonald’s
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After a disappointing performance in fiscal 2014, McDonald’s Corporation (NYSE:MCD) recently released its February comparable store sales report, where the company reported a 1.7% decline in the comparable store sales, with 4% year-over-year (y-o-y) decline in U.S. comparable sales, and a 4.4% decline in Asia-Pacific comparable store sales. [1] On March 4, McDonald’s announced new menu sourcing initiatives in the U.S., including sourcing of chicken raised without antibiotics. [2]
McDonald’s stock rose sharply from $97 to just below $100, and then declined back to $97 during the last week. Our price estimate for the company’s stock is $96 (market cap of $94 billion) which is roughly the same as the current market price.
See Our Complete Analysis For McDonald’s Corporation
Dunkin’ Brands
Dunkin’ Brands, after mixed results in its fourth quarter earnings report, has signed a long-term franchise agreement with Golden Cup Pte. Ltd, as wholly owned subsidiary of RRJ Capital Master Fund II, which will serve as the franchise partners to open and operate nearly 1,400 Dunkin’ Donuts stores in China. [3] Moreover, Dunkin’ Brands, along with J.M Smucker Company (NYSE: SJM), expanded its partnership with Keurig Green Mountain (NASDAQ: GMCR) by signing agreements for the manufacturing, marketing, distribution, and sale of Dunkin’ K-Cup packs in the U.S. and Canada. [4]
Dunkin’ Brands’ stock traded between the range of $47 and $48.50 during the last week. Our price estimate for the company’s stock is $48 (market cap of $4.7 billion), which is roughly the same as the current market price.
See full analysis for Dunkin’ Brands
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Notes:- McDonald’s reports global comparable sales for February [↩]
- McDonald’s USA announces new antibiotics policy and menu sourcing initiatives [↩]
- Dunkin’ Donuts announces expansion plans in China with signing of largest development agreement in company history [↩]
- Dunkin’ Brands, The J.M. Smucker Company and Keurig expand partnership to make Dunkin’ K-Cup packs available at retail outlets nationwide and online [↩]