McDonald’s credit gets a downgrade

McCredit slump. After a couple of years of reporting rocky revenue figures, McDonald’s has announced that its same-store sales are up (by 1.2%) for the 5th quarter in a row. That figure was greater than what the company had anticipated. Hand ‘em an apple pie! Or not.

“Fitch believes McDonald’s will continue to gradually lose share over the medium term.”

On Monday, Fitch Ratings downgraded the company’s credit rating from BBB+ to BBB.  What happened?

Fitch points out that the rise in sales is attributed to the company having raised its prices by more than 3.5 percent, which meant traffic was down 2 percent.

“McDonald’s is responding to changing consumer preferences by emphasizing food quality,” Fitch wrote in a press release. “However, Fitch believes McDonald’s will continue to gradually lose share over the medium term in the U.S. due to increased choices for consumers, stemming from the growth of specialty burger shops like Shake Shack and Five Guys, and some weakening in McDonald’s brand perception within the hamburger category and among younger and health-conscious consumers in recent years.”

While Fitch classified the company’s outlook as “stable,” it did point out that McDonald’s shaky market share coincided with the surge of fast-casual operators and shifting consumer preferences since 2012.

Also tagged

Jeffrey Kittay After teaching literature at Yale, Kittay founded and was editor-in-chief of the magazine Lingua Franca: The Review of Academic Life, which the New York Times called “a hip trade journal for the cerebral set.” It won the National Magazine Award for General Excellence. He was subsequently part of the adjunct faculty at the Graduate School of Journalism of Columbia University, and the corporate board of Maine’s Portland Press Herald.

Kittay holds a Ph.D. from NYU and an Honorary Doctor of Humane Letters from Amherst College.