McDonald’s stock price trades 11% higher despite sliding same-stores sales

McDonald’s stock price trades 11% higher despite sliding same-stores sales
Written by:
Michael Harris
8th April, 18:02
  • Same-store sales in the U.S. grew 0.1% in the Q1, but fell 34.7% internationally
  • In March, global same-store sales fell 22% due to a collapse in international demand
  • McDonald’s stock price trades 11% higher as it has managed to recover more than half of losses occurred in Feb
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Shares of McDonald’s (NYSE:MCD) have gained around 11% this week, as the restaurant chain reported that its global same-store sales fell 22% in March due to the poor performance of its international business segments.  

Fundamental analysis: International markets suffer greatly

McDonald’s has released an update on the COVID-19 impact on the restaurant chain’s operations and business in general. The Chicago-based company said that transactions at its fast-food restaurants dropped 40% in the week ended March 29, while the full-service restaurants witnessed their transactions collapse 79% in the same period. 

“Approximately 75% of our restaurants around the world are operational, the majority of which have adapted to focus on Drive-thru, Delivery, and/or Take-away,” said McDonald’s President and Chief Executive Officer, Chris Kempczinski.

A great performance in the first two months of the year is likely to offset losses suffered in March. McDonald’s reported that U.S. same-store sales grew 8.1% in two months ended February 29. 

“The situation remains fluid, and as the duration and scope of COVID-19 continues to evolve, it is not possible to estimate the full extent of the impact on our business at this time,” said Kempczinski.

Still, the same-store sales slid 13% in March, which will probably result in the Q1 same-store sales growth of 0.1% in the United States. This is, despite the mass closure of restaurants in March, a very good performance in the Q1. 

However, things aren’t so rosy globally. McDonald’s witnessed same-store sales crash nearly 35% in March internationally. All in all, same-store sales fell 3.4% in the first quarter, thanks to the fall in March sales of 22%.

As a result, McDonald’s decided to cut its capital spending plans from $2.4 billion to $1.4 billion, in addition to taking a multi-billion loan to boost its liquidity.

“We have taken important steps to preserve our financial flexibility, including suspending our share repurchase program and increasing our cash position by raising $6.5 billion in the debt markets during the first quarter,” added Kempczinski.

Technical analysis: More than half of the losses recovered

Following a sharp drop in the value of McDonald’s shares in February and March, the stock price has managed to recover more than half of its losses. As a result, the buyers are now approaching the key resistance near the $190 handle. 

McDonald’s stock daily chart (TradingView)

It is unlikely that the bulls will be able to push through this resistance in the first attempt, given its historical importance and strength. If broken, the buyers will then aim for $194 and $202, levels where two important daily moving averages are trading currently.

On the downside, the previous resistance and now support – the zone around $170 – will provide any support necessary for bulls to continue moving higher in the coming days and weeks. 

Summary

Shares of McDonald’s are trading more than 11% higher this week as the stock price has managed to recover more than half of the losses suffered in February and early March. The restaurant chain said that its global same-store sales fell 22% on the back of the poor performance in international markets.

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