McDonald's (MCD) store expansion targets fell short of Wall Street's estimates as investors remained focused on a potential rebound in US traffic growth, RBC Capital Markets said in a note Thursday.
The fast food giant is targeting net restaurant growth of nearly 4.5% in 2027 and 3% to 3.5% annually from 2028 to 2030, Chief Financial Officer Ian Borden said at its investor day on Wednesday.
McDonald's plans to invest $5 billion through 2030 and about $8.5 billion by 2036 to accelerate restaurant modernization, technology deployment and operational improvements as part of its NEXT strategy.
The unit growth outlook through 2030 was below consensus by about 100 basis points per year, while store and technology investments were likely larger than expected, RBC analyst Logan Reich said. That drove McDonald's shares 4.8% lower on Wednesday to the lowest level since 2022, Reich said.
The stock was up 1.2% intraday Thursday, but have fallen 21% this year.
RBC is particularly cautious on McDonald's comparable sales growth in the US.
"Improvements to US value offerings translating to traffic growth remains key to improving investor sentiment in the near-term, in our view, though little incremental color was provided on the entry-level pricing strategy throughout the (investor day) as the company is still working to refine that portion of the menu," Reich said.
RBC trimmed its third-quarter consolidated same-store sales growth outlook to 1.5% from 1.6%, and now projects the US figure to drop 0.3%, compared with its prior forecast that called for a flat print. Analysts polled by FactSet expect overall same-store growth to hit 1.5%, with domestic sales unchanged.
"Given the challenging macro backdrop, we think US (same-store sales) could continue to be pressured until the company finds a way to resonate with lower- and middle-income consumers," Reich wrote.
The investment firm lowered its price target on McDonald's stock to $285 from $290 and reiterated its sector perform rating.
Last month, McDonald's second-quarter revenue fell short of market expectations as comparable sales growth in the US slowed year over year.
Darden Restaurants' (DRI) fiscal first-quarter revenue narrowly missed market expectations on Thursday as the company posted weaker-than-expected comparable sales. Restaurant chain Cracker Barrel Old Country Store's (CBRL) fiscal fourth-quarter earnings increased year on year, partly driven by tariff refunds, while the restaurant chain's chief financial officer said Wednesday that its traffic trends were improving.
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