McDonald’s (MCD) and Chipotle Mexican Grill (CMG) share prices have slid over the past twelve months, yet neither firm trades at attractive valuations. Investors shouldn’t take a bite out of either stock at current valuations, especially after their recent disappointments.
McDonald’s Sales Are Down
McDonald’s profits suffered their first monthly decline in nine years at stores that have been open for over a year due to a drop in U.S. sales. The U.S. market accounts for about one third of McDonald’s revenue. A decrease in profits by 1.1% was predicted by various analysts who track the stock closely. McDonald’s stock has decreased by about 15% during 2012.
McDonald’s plan is to advertise its Dollar Menu in order to attract value-conscious consumers. Moreover, new items are also to be added to the menu in 2013. McDonald’s is not the only store to be using this strategy, however. Burger King Worldwide (BKW), Wendy’s (WEN), and Yum Brands (YUM) are also adding new items to their respective menus. According to Telsey Advisory Group analyst Peter Saleh, McDonald’s now has real challengers to contend with: “McDonald’s has been taking share from everyone for many, many years.” Now, competitors are:
fighting back… Burger King has been revamping their menu and advertising like crazy. They’re getting more aggressive. And Taco Bell is getting more aggressive with advertising.
Sales have fallen by 2.2% in Europe and by 2.4% in Asia Pacific, Africa and the Middle East. Profits are expected to fall even further because of the holiday season.
Questioning Chipotle’s Prospects
Chipotle Mexican Grill has been criticized because of its decelerating sales and earnings growth in 2012. To continue reading, click here.