McDonald’s numbers represent a classic case of accounting intricacies. The company reported March 8 that sales dropped 1.5 percent in February 2013 compared to the year before. Wall Street, however, had expected a bigger drop. Adjusted for the 2012 leap year, they are even up 1.7 percent.
So how do we get from a 1.5 percent drop in sales to shares rising 1.6 percent in early afternoon trading in New York March 8? At first we have to compare the figure to Wall Street expectations. Even if the number is negative, that should have already been discounted weeks to months earlier. If the number is better than expected some of the discount needs to be reversed, hence the rising share price ($98.58 at 2:20 EST).
“U.S and Europe sales came in ahead of expectations, while APMEA modestly missed [estimates],” says Citigroup. Furthermore, the decline slowed from a negative 1.9 percent in January.
“The better than expected results were favorable as our checks indicate that overall [the fast food] industry likely softened from Jan. into Feb. given higher payroll taxes, delayed refund checks, and higher gas prices. It does not appear the company was impacted significantly by these macro issues given the broad appeal of the brand, which is encouraging,” Citigroup analysts write in a note to clients.
So how does one get from a sales slow-down to actual growth? In this case, one needs to adjust for one more day in February 2012 because of the leap year. Removing the extra day (boosting total sales in 2012) and comparing Feb. 2012 and Feb. 2013 with the same number of days, sales were up 1.7 percent, another positive.
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