BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Even With Slowing Sales, You Shouldn't Stop Loving McDonald's

This article is more than 10 years old.

McDonald's in Rome, Italy (Photo credit: Erik Daniel Drost)

The Golden Arches haven't lost their luster.

McDonald's overseas sales growth did slow last month. Much of it was unavoidable, analysts say.

The growth slip was most noticeable in Asia, the Middle East and Africa, where comparable store sales growth fell by 1.6% from a year ago. Weak consumer demand in Japan and the Chinese lunar New Year hampered efforts there, the company said today.

China has been a growth market in past years, and there's no reason to think McDonald's strategy there—or in any emerging market—has suddenly gone wrong. "I don't think there are fundamental issues" there, says Buckingham Research analyst Mitchell  Speiser.

European sales growth slowed too and fell by 0.9%. Widespread austerity measures and a bitterly cold winter led to those declines, the company said.

Undoubtedly poor weather and purse-tightening can stop people from eating out. And McDonald's has a slightly different perception in Europe, where it's perceived less a low-income staple than a middle-class treat, says Lazard Capital analyst Matthew DiFrisco. Treats tend to get cut from family budgets when times are tough.

Soon after McDonald's announced this growth downturn today, its stock promptly fell. It traded at $96.98, down 3.2%, in late afternoon trading.

Wall Street has probably been expecting too much from the fast food chain, says Morningstar analyst R.J. Hottovy. "I think that given the stock’s had a good run in the past year and a half, and I think investors are looking for an excuse to take some provifts off the table," he says.

McDonald's is still better positioned for growth and sales than its peers, Hottovy says. In Europe and Asia, it competes with Yum! Brands, which operates KFC, Taco Bell and Pizza Hut,  Starbucks and privately held Burger King. It also faces some domestic competition from the Wendy's burger chain.

It's important to note that, in America, people are still in love with their big macs. Boosted by the new Chicken McBites and a menu full of more classic choices, domestic sales growth expanded 8.4%.

Reach Abram Brown at abrown@forbes.com. Or follow him on Twitter @abebrown716.