It was at least twenty years ago that our Co-Op saw a presentation from Oak Brook
"experts" who observed that over the years McDonald's benefited from an increase
in durable goods orders in the United States. Hedgeye Research just released a report
charting durable goods since 1997.
The HEDGEYE report is HERE
(Clicking on the chart brings up a larger and easier to read version)
Durable goods were generally positive in the late 1990s but McDonald's missed out on
that trend because of the cannibalization of the Convenience Strategy and the impact
of slow service times resulting from "Made For You". The increases beginning in 2003
are reported to be because of the "Plan to Win" but it looks like durable goods might also
have contributed to this success. Durable goods took a huge dip in 2009 and that was the
softest year out of the last ten for same store sales at McDonald's USA. I've made the case
that sales were poor in 2009 because McDonald's Operators wasted their advertising $$$
on espresso based drinks. But, there were strong economic headwinds.
While sales at McDonald's USA don't track perfectly with durable goods it's an interesting
metric to watch.
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4 comments:
The 2012 end of that chart does not look good for the near term future!
Most of the MRPs are done on older buildings with low rent. These low rent stores have been the ones supporting the organization. With new store rents coming in at 16-18% it is difficult for the store to cash flow and now that the low rent stores are taking on the MRP debt it is hard to support the organization. Again net cash flow and equity are lowered.
Just increased transaction counts is not going to work if they are unprofitable. We have created a scenario of working harder for less. We need an window of time to just make profits w/out giving them all back to corporate.
Next Year projected service cost increases (insurance / utilities / tech fees / etc.) are going to be a back breaker.
Simply increasing TC's is not going to work, especially if they are unprofitable ones. We’ve created a scenario
of working harder for less. Thee needs to be a window of time to just make profits without giving them all back.
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