What Recession? This Company is Growing !

Most companies based in the USA are in contraction mode laying off people, cutting expenses, postponing projects, etc. to survive this downturn.

On Jan 23, 2009 the Financial Times reported:

“McDonald’s is planning to this year create 12,000 jobs and open 240 new restaurants across Europe, it emerged on Friday, as the fast-food chain shows signs of being one of the few global companies to benefit from the financial crisis.

In stark contrast to the multinational groups announcing record job cuts and losses, McDonald’s plans for expansion in Europe are its biggest in five years.

“We’re certainly not slowing down,” said Denis Hennequin, president of McDonald’s Europe as he outlined to the Financial Times his plans to hire 50 people at each of the 240 new restaurants, mostly in Spain, France, Italy, Russia, and Poland”

The company says the reasons the expansion in Europe the low-priced menus ,improved store designs, new menu choices and food price inflation. While the first three points are understandable the last one is open to argument.

McDonald’s also said that it plans “to add about 400 new McCafes to the 800 it already has in Europe this year.”

Some of the reasons that MCD is flourishing in a downturn economy worldwide are:

1. In many countries McDonald’s is a novelty and consumers want to give it a try.

This is true in emerging market countries and also in some Europe countries.

2. As mentioned by the company, consumers prefer to eat something that is cheap. This is true in Europe as well where local food prices could be high in traditional eating places. Though their food may not be of as good quality as other fast food restaurants they food is comparably cheaper. This is a huge draw among cash-strapped consumers.

3.McDonald’s brand is very popular all over the world and it continues to take advantage of that with effective marketing.

4. The company positions its stores in some of the strategic places around tourist locations, busy thoroughfares, near malls, etc. In countries such as Canada they can be found inside a huge mall right next to high-end fashion or jewelery stores.

McDonald’s (MCD) is a Dow component and is a core holding in many mutual funds. The stock pays a dividend of 3.45% and the market cap is about $65 B. Since going public, the stock has split 9 times.

Leave a Reply

Your email address will not be published. Required fields are marked *