McDonald’s 1,000-store Closure is Not Its Only Headwind

VIDEO: What nearly a thousand stores closing looks like

Andrew Willis 11 May, 2022 | 12:24AM
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Andrew Willis: In response to Russia’s invasion of Ukraine, McDonald’s (MCD) decided to shutter around 950 stores between the two countries. But while it was tough to end Big Macs in Moscow and Kyiv, the people likely most harmed by the move are local employees, rather than investors.

Equity analyst Sean Dunlop says the removal of 950 stores from the books of the company only presents a slight long-term headwind to unit growth, and an upper-single-digit impact to sales this year.

Investors should instead focus on the resiliency of Mcdonald's across its roughly 40,000 stores globally, which we highlighted about a year and a half ago – back when it was undervalued. The company is so fast to adapt, it was among the best positioned to navigate a rapidly-changing foodservice industry. We also feel the company’s equipped to navigate the wider economic terrain as well…

But no matter how strong the fundamentals, there has to be a limit. And even amongst the best fast-food chains, inflation is going to take a bite. We believe the market is now outrunning its fair value with some signs that customers are increasingly preferring the value menu - which could see lower profitability in the near term – or perhaps until we get tempted by the next new burger on the menu.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
McDonald's Corp233.91 USD2.14Rating

About Author

Andrew Willis  is Senior Editor for Morningstar Canada