A Look Back and Ahead at McDonald's Stock

Core Viewpoint - McDonald's has experienced a year of stock price growth and sales momentum, but faces challenges in maintaining this momentum in 2026 due to economic conditions and customer demographics [1][2][8]. Historical Performance - McDonald's stock price increased by 9.3% in 2025, with a total return of 11.1% including dividends, which underperformed compared to the S&P 500's 17.5% [4]. - The company achieved a gross margin of 57.25% and a dividend yield of 2.25% [5][6]. Sales Growth and Strategy - Management shifted focus back to value pricing, which had previously attracted customers and addressed sluggish same-store sales [6][7]. - McDonald's reported a 3.6% growth in comparable sales (comps), with positive comps in both the U.S. and international markets [7]. Key Issues for 2026 - The broader economy is showing signs of weakening, with rising unemployment and persistent inflation, which could impact customer spending at McDonald's [8]. - There is a demographic shift with higher-income customers frequenting McDonald's more, while lower-income traffic has decreased. The effectiveness of the lower-priced menu in attracting this core demographic is uncertain [9]. - Management's engagement with franchisees regarding menu pricing will be crucial, as approximately 95% of McDonald's 44,600 locations operate under franchise agreements [9]. - Monitoring comps will be essential; stronger comps driven by higher traffic would indicate success, while weak comps may suggest a lack of perceived value [10].