By Bob Blandeburgo
Associate Editor
Money Morning
McDonalds Corp. (NYSE: MCD) yesterday (Monday) became the latest in a long line of U.S. companies to find growth overseas as domestic growth continues to falter.
Although there are some signs show the United States is headed toward a recovery, rising unemployment is weighing on consumers, who continue to cut back on discretionary spending.
The fast-food giant said its same-store sales in the United States dipped slightly in October, falling 0.1%. But overseas was a different story for McDonald’s. Same-store sales in Europe grew 6.4% and sales in the Asia/Pacific region, the Middle East and Africa collectively grew 4.7%.
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“We’re encouraged by continued strength in the international business, which more than offset the anticipated domestic softness,” David Tarantino, an analyst with Robert W. Baird & Co. Inc., wrote in a note obtained by Bloomberg News. Tarantino rates McDonald’s shares “outperform.”
Other global companies have seen similar results:
- The Coca-Cola Co. (NYSE: KO): The soft drink maker in the third quarter saw its year-over-year volume in North America drop 4%, but said its “Open Happiness” ad campaign is going over well internationally. Unit case volume for Coke products in Mexico grew 8%, 6% in Italy, 3% in China and 27% in India.
- General Motors Corp. (NYSE: GRM): The automaker’s sales in China continued to flourish last month as the government kept its stimulus policy in place. While GM did show domestic growth of 4.7% in October compared to a year ago, it more than doubled its October 2008 sales in China, with 166,911 cars sold in what is now the world’s biggest auto market.
- Yum! Brands Inc. (NYSE: YUM): The owner of the Pizza Hut, Taco Bell and Kentucky Fried Chicken brands saw flat same-store sales in the third quarter for China, and a 5% drop here in the United States. However, its overall revenue in China grew 11% thanks to torrid expansion – it opened 88 locations there just in that quarter alone. Yum’s international sales excluding China gained 4%.
- The Dow Chemical Co. (NYSE: DOW): Although the chemical maker suffered steep volume declines in most territories, its Asia Pacific region was the lone bright spot, growing 2%, compared to 13% drops in North America and Europe. The bleeding was minor in areas that included emerging markets, with a 1% drop in Latin America, India, the Middle East and Africa.
Billions of dollars in stimulus money are still playing a big role in emerging markets such as China, where aggressive cuts on sales taxes on small automobiles have helped. The United Kingdom last week approved an extra $41 billion in stimulus.
In the United States, a 10.2% unemployment level and waning consumer confidence could force Washington to consider a second stimulus.
“The unemployment rate of 10.2% is problematic because it gives a sense of urgency to Washington, D.C. Washington will be looking for any increase in stimulus,” Tom Sowanick, co-president and chief investment officer at OmniVest Group LLC told Reuters.
News and Related Story Links:
- Money Morning:
Unemployment Rate Cracks Double-Digit Barrier at 10.2%, Boosting the Odds of a “Jobless Recovery” - Bloomberg News:
McDonald’s October Sales Rise 3.3% on Europe, Asia - Reuters:
U.S. Jobless Rate Surges to 10.2%
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