NEW YORK—Stock performance for McDonald's, Burger King and other large quick-service chains continues to be generally positive, but performance for most casual chains is weak, according to Standard & Poor's year-end 2008 RatingsDirect retail industry report card.
S&P's analysts noted that McDonald's and Burger King each achieved "meaningful" same-store sales increases last year, reflecting their leveraging of breakfast, snack and late-night opportunities. Their stable-to-improved margins reflected advantages as franchisors that directly operate only small percentages of their total restaurant systems (less vulnerability to rising food/labor costs and ability to leverage fixed and administrative costs).
Yum Brands, Inc. also performed well; the company's repurchase of nearly $1.7 billion of its shares in 2008's first three quarters weakened its credit metrics, but these are expected to improve in 2009, given that Yum has stated that it will not buy additional shares this year.
The report said casual- and family-dining chains saw same-store sales that generally ranged from mid-single-digit declines to modest increases, with performance worsening as the year progressed. Furthermore, most that saw gains did so as a result of price increases that offset traffic declines.
The major exception was Darden Restaurants, Inc.'s Olive Garden chain that saw "healthy" same-store sales gains last year, the analysts noted.
