This post is part of the On the Margin blog.
A few McDonald’s Corp. investors seem to be betting on the chain’s comeback without actually betting on the chain.
Since the beginning of August, a period in which the stock market has been volatile and the S&P 500 Index is down nearly 8 percent, McDonald’s stock is down a 2.4 percent.
That’s hardly a ringing endorsement, to be sure. But then consider this: All of the chain’s primary, QSR competitors are down much more than that.
Restaurant Brands International stock is down 13 percent. Wendy’s is down 12 percent. Jack in the Box is down 17.7 percent. Sonic is down 16 percent. Yum Brands is down 10 percent.
To be sure, it’s entirely possible this is all coincidence. It’s also worth noting that the stock is trading well below its 52-week high of nearly $102 a share, a high reached since Aug. 1.
Still, at least some analysts believe the stock movement is a sign that Wall Street is betting on a McDonald’s sales turnaround not by buying up the stock, but by betting against those competitors.
McDonald’s sales weakness over the past three years has been a boon to other QSR chains, all of which have greatly outperformed the Golden Arches. In the second quarter, for instance, the chain’s same-store sales were 730 basis points lower than the average sales performance of those primary competitors.
That gap is likely 900 basis points or even more if you factor out breakfast, where McDonald’s gets more than a quarter of its sales and which has been performing well despite the chain’s weakness.
In October, McDonald’s is planning to start serving breakfast items all day, a big bet by the company that giving customers something they’ve requested for years — Egg McMuffins at 3 p.m. — will provide the chain with the sales boost it needs.
If that plan succeeds, then the chain would theoretically start taking back some of the sales it lost to those other concepts in recent years. And thus, their sales would suffer. At least that’s where investors appear to be placing their bets.