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Is McDonald's doomed?

January 28, 2014: 10:46 AM ET
With shares of McDonald's lagging that of other fast food companies, it's no wonder Ronald is not smiling.

With shares of McDonald's lagging that of other fast food companies, you could hardly blame Ronald for crying.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Are the meals no longer as happy for McDonald's customers as they used to be? The fast food giant definitely seems worried.

McDonald's (MCD) reported lackluster quarterly results last week. And company executives used the words "relevance," "relevant" and "relevancy" a combined 20 times during its conference call with analysts. Translation: the leaders of the Golden Arches are very concerned about whether the company is still relevant.

If you look at the expected growth rates for Mickey D's biggest burger rivals -- as well as upstarts in the so-called fast casual restaurant chain industry -- I'd be "Grimace"-ing too. (Sorry. But I miss that purple blob!)

Sure, McDonald's stock did go up last year. But that's not saying much. Just about everything went up. Shareholders have reason to be a little miffed since McDonald's lagged the S&P 500.

But even worse than that, McDonald's has underperformed Wendy's (WEN) since the beginning of last year ...

... and also has not gone up nearly as much as Burger King (BKW).

What's wrong with McDonald's? As management pointed out last week, a big issue is the menu. New offerings, like the Mighty Wings, have not been a huge hit.

Meanwhile, Wendy's has had success with things like its Pretzel Bacon Cheeseburger. And Burger King has appealed to the "health-conscious" with its reduced calorie/lower fat Satisfries. (Tongue planted firmly in cheek. They're still called fries. Not roasts, sautés or steams.)

But even if McDonald's is able to find new menu items that consumers might want (May I suggest a bison burger? A pizza burger?), it will still be very difficult for it to grow as fast as its smaller rivals. That's because it is already McMassive.

There are more than 35,000 McDonald's restaurants worldwide compared with just 13,000 for Burger King and around 6,500 for Wendy's. Of course those two are expected to grow more rapidly.

Related: Which country has the cheapest Big Mac?

According to FactSet Research, analysts expect profits at McDonald's to rise just 8% a year, on average, for the next few years, compared with forecasts of 16% long-term growth for Burger King and 25% for Wendy's. So it's no wonder that investors aren't "ba da ba ba ba" lovin' McDonald's lately.

Still, McDonald's can't completely be given a pass simply because it's a behemoth. Rival Yum! Brands (YUM) actually has more restaurants worldwide: More than 40,000. And Yum's profits are expected to rise 11% a year.

Tangent alert. What's up with big companies starting with the 25th letter of the alphabet and exclamation points? Yum! Yahoo! (YHOO) At least Yelp's (YELP) corporate name is still lacking this excessive enthusiasm. Tangent over.

Related: Pizza Hut serving single slices

One reason why Yum is doing better is because -- despite some big hiccups last year -- it has done very well with expansion into China. But you also can't help but notice that Yum is essentially three companies: KFC, Taco Bell and Pizza Hut. McDonald's is not that diverse. It has all its Egg McMuffins in one basket.

It wasn't always that way. McDonald's used to own a majority stake in Chipotle (CMG), the company that has come to define the fast casual revolution. McDonald's spun off Chipotle in 2006.

Chipotle, which will report its latest results  Thursday, has been a phenomenal success since pulling a Fleetwood Mac and going its own way. (Loving your Mexican menu. Isn't the right thing to do.) Analysts are expecting Chipotle to report sales growth of nearly 20% for the fourth quarter and an increase in earnings per share of nearly 30%.

I've been joking on Twitter that if the Denver-based company does well, that could be a sign the Broncos will win this coming Sunday.

Then again, Microsoft (MSFT) and Starbucks (SBUX) bucked the bears (market, not Chicago) last Friday, thanks to their solid earnings.

So maybe that's a good omen for Seattle. Or perhaps I should analyze Denver's offense and the Seahawks' defense before making my Super Bowl pick. But I digress. Again.

Just look at how well Chipotle shares have done since the spin-off. It's hard not to think of what might have been for McDonald's if it had decided to hold onto Chipotle.

Still, Chipotle is just one example of how McDonald's is losing out to other restaurant chains. Companies like Panera (PNRA) and Buffalo Wild Wings (BWLD) are also stealing some of Mickey D's thunder.

Depending on where you live, there are also scores of smaller chains specializing in beefier and more exotic burgers. Privately held Five Guys has made waves. In-N-Out Burger is like a religion out in California.

And since I live in hipster doofus Brooklyn, I can't imagine going to a McDonald's when there are independent chains selling elk, ostrich, boar and other kinds of yummy burgers ... not to mention good old-fashioned beef. (Mmm-mmmm. That is a tasty burger. Ever have a Big Kahuna Burger?)

So I wish McDonald's luck in trying to regain that "relevance" factor. It's going to be a tough battle. There are just too many options these days for consumers -- even those who want a quick and relatively cheap meal.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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