McDonald's Corporation (MCD, Financial) has decided that it will stop posting its monthly sales. The company believes that posting sales quarterly will show a true picture of the financial performance rather than monthly reports. This means that shareholders of the fast food joint will have to wait for three months to see the effect on the changes that the company is trying to bring about after a series of disappointing performances. Shares of the company rose 0.4% to $98.90 in morning trading on NYSE.
Business restructuring
McDonald's has undertaken a series of changes as it embarks on its journey of becoming profitable. Steve Easterbrook, the new CEO, has said that McDonald's will now toast its hamburger buns for a longer period of time. The company will also change the way beef patties are seared so that consumers can enjoy more juicier burger patties. Additionally, the Illinois-based fast food joint will engage in construction activities of building side by side drive-through lanes so that deliveries can be made at a faster pace. Employees will also receive training to increase their efficiency in taking orders. Another measure that will be implemented from July 1 is to stop reporting monthly sales.
Quarterly sales report
The main aim of this plan is to focus on activities and conversations directed towards a long term basis. Easterbrook echoed the following words on the matter, “Disclosing comparable sales as part of our quarterly reporting is consistent with nearly all retailers and will provide a greater understanding of McDonald’s sales results in the context of the Company’s overall financial performance…and it will align with the our longer-term view of building shareholder value.” The company's same-store sales have seen a drop for a long period of almost 11 months. For the month of April, around 0.6% decline was observed in same-store sales worldwide. Same Store sales in the United States saw a decrease of 2.3%. It seems that McDonald's is following the footsteps of Starbucks Corporation (SBUX, Financial), Chipotle Mexican Grill, Inc. (CMG, Financial), KFC, Pizza Hut and many others who do not reveal their monthly sales.
Investor impact
McDonald's started posting their monthly sales way back in 2003, according to the company's spokeswoman Heidi Barker Sa Shekhem. The last monthly sales will be reported on May 8 for the month of June along with the second quarter performance. Easterbrook, in the turnaround strategy that he announced at earlier this month, said that he was now focusing on cutting down costs as well as giving cash back to shareholders. Jack Russo, who works as an analyst at Edward Jones & Co. said that the company's decision to reveal their same-store results quarterly is a good move. He said this will help investors to not focus much on short-term issues, which is a good thing for the company.
It seems that McDonald's has finally come up with a strategy to bring about some changes to turn it into a profitable company. The company has been embroiled in many controversies in the near past. McDonald employees from 19 U.S. cities had complained of burns received from fryer oil and hot grills. The company has a lot to worry about, including its reputation and financial performances. Shares of McDonald's increased 5.3% this year and 13% on the Standard & Poor’s 500 Restaurants Index .The company expects a fall of 0.9% in earnings, IE from the previous $4.83 to $4.79.
Earlier this month, TheStreet rated McDonald's as a BUY. Given that the gross profit margin of the company is 36.94%, it indicates that McDonalds is expanding their profit margins over time. Now, it is up to the push and pull of the overall market trend that could actually create an impact. Though EPS have fallen in the past two years, things might turn around given the new restructuring plan.
