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McDonald’s (MCD) Plans to Open Restaurants in Nordic Regions

Zacks

Per media report, McDonald's Corporation MCD is likely to open 200 restaurants in the Nordic region over the next decade, in a bid to attract customers. Notably, it is the world’s largest fast-food restaurant chain, with presence in more than 100 countries. In fact, with an almost 10% share of the global informal-eating-out market there is ample scope for the company to grow in the future.

Meanwhile, McDonald’s seems to be increasingly focusing on delivery services in order to cater to its customers' needs in a better way. It is expected to begin home delivery in the Nordic region from this year. In Sweden and Finland, McDonald’s will start home delivery services from May onwards, while in Denmark and Norway in the latter half of 2018. In Denmark, Sweden, Norway as well as Finland the company serves 150 million customers a year and has nearly 430 restaurants in the region.

These recent plans indicate that the company is targeting to regain its market share from its competitors. McDonald’s has been reporting weak traffic trends in certain major markets for quite some time now.

Expansion Plans to Drive Traffic & Sales


Increasing guest counts remain the company’s top priority and it intends to regain customers by focusing on food quality, convenience and value. Moreover, McDonald’s expects its velocity accelerators of Experience of the Future, digital and delivery to drive growth over the long term. We believe that the company’s decision to open restaurants in Nordic regions will not only boost sales and traffic but will also pave way for long-term growth.

Stock Performance

In the past three months, shares of the Zacks Rank #4 (Sell) company have lost 6.2%, wider than the industry’s decline of 3.8%.

Also, McDonald’s margins have been under pressure from worldwide wage increases recently. This apart, additional health care costs related to Obamacare in the United States led to a rise in labor costs. Further, costs associated with brand positioning in all key markets as well as ongoing investments in initiatives are expected to continue weighing on margins, at least in the near term. Increased commodity costs might further pressurize margins.

Stocks to Consider

Better-ranked stocks from the same space are Arcos Dorados Holdings Inc. ARCO, Dine Brands Global, Inc. DIN and Ruth's Hospitality Group, Inc. RUTH. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arcos Dorados Holdings has an impressive long-term earnings growth rate of 19.4%.

Dine Brands Global has reported better-than-expected earnings in the preceding four quarters, with an average beat of 7.3%.

Ruth's Hospitality Group has an impressive long-term earnings growth rate of 14.3%.

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