McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM): Going Strong in a Slow Economy

The global obesity epidemic is motivating consumers to shift towards healthier and fresher food choices. In order to attract this diversified customers base, McDonald’s Corporation (NYSE:MCD) is rolling out menu changes.

McDonald’s Corporation (NYSE:MCD) is the leading global food service retailer, serving 69 million customers each day in more than 118 countries with 34,000 local restaurants, out of which 80% are franchised. Despite competition from numerous franchises, it is still expanding and is an excellent restaurant investment.

Fundamentals

McDonald’s Corporation (NYSE:MCD) has increased its first quarter earnings year over year, but has failed to meet the market expectations due to weaker international sales. First quarter earning per share are $1.26, up from $1.23 per share in the year-earlier period. Total revenue increased to $6.6 billion from $6.55 billion a year ago. The analysts estimated earnings per share of $1.27 and revenue of $6.59 billion for the first quarter reported by Thomson Reuters.

May sales

In the month of May, McDonald’s Corporation (NYSE:MCD) ‘comparable restaurant sales’ around the world surged 2.6%, better than the 0.6% fall in April. The increase is due to offering for late night breakfast, cheap eats and new menu items such as chicken McWraps and egg white McMuffins. Sales at same restaurants in the United States edged up 2.4%, while this figure is 2% and 0.9% in Europe and Asia respectively.

Israel sales

McDonald’s Corporation (NYSE:MCD) is now refusing to open its fast food outlet in Israel due to a long standing policy of staying out of the occupied territories. The company has more than 180 stores in Israel, and accounts for 70% of Israel’s fast food industry. It entered Israel in 1993, and has grown by nearly nine branches a year. After this decision by McDonald’s Corporation (NYSE:MCD), settler organizations called for an immediate boycott of McDonald’s restaurants, which may hurt it sales.

Stores upgrade

McDonald’s intends to spend more than $1 billion to upgrade its stores interior and plans at 1600 locations this year. It has an investment budget of $3.2 billion, out which $2 billion is for creation of new stores and $1 billion for upgrading current stores. This plan will give it an advantage over its competitors like Yum! Brands, Inc. (NYSE:YUM), which is only spending $1 billion on stores in 2013.

Last year, McDonald’s Corporation (NYSE:MCD) upgraded 2400 stores, and has already upgraded 60% of its stores out of total 34,000 globaly. After upgrading, McDonald’s expects its sales will increase by 6% to 7% this year.