OAK BROOK Ill. McDonald’s same-store sales gains for May should fall close to the burger giant’s 2-percent increase for April, but profit margins were eroded by the promotional giveaway of new fried chicken sandwiches and the impact of commodity costs, particularly on Dollar Menu sales, according to forecasts from financial analysts.
McDonald’s is scheduled to release its May same-store sales results on Monday.
RBC Capital Markets forecast McDonald's year-over-year same-store sales increase at 1.5 percent, noting that the sales trend remained positive despite the impact of higher gas prices on consumer spending. Its research report asserted that the chainwide giveaway of the new Southern Style chicken sandwiches succeeded in convincing consumers to give the new options a try, but eroded margins. Even with the giveaway, RBC’s analysts said, McDonald’s worldwide sales for May could top the year-ago figures by as much as 5 percent.
McDonald's was up against difficult comparisons from last May, when the company posted a domestic same-store sales increase of 7.4 percent and a worldwide gain of 8.7 percent.
Franchisees expect their comps for the month to rise year-over-year by 2.1 percent, according to independent analyst Mark Kalinowski, who surveys the operators every month. In the most recent canvass, franchisees reported that customer and transaction counts improved appreciably, but that lower-ticket items and bargain hunting had depressed check averages. The “Dollar Menu is killing us,” one groused. Others reported that they’re pushing through the $1 barrier to charge more for items on the roster of bargains.
Twenty of 28 franchisees who responded to a question about their relationship with franchisor McDonald’s Corp. described it as fair. Half of the total field of respondents predicted a fair business outlook for the next six months.
Kalinowski said the comments received may not be representative of the U.S. franchisee base in general.
