Millennials to McDonald’s: We’re not lovin’ it

It’s a company that still mints $28 billion in worldwide revenue, and $5.6 billion in profits last year. The stock yields 3.4% and is a stalwart of the Dow Jones Industrial Average (^DJI).

McDonald’s (MCD), the world’s largest restaurant chain operator, isn’t immune from competitive threats and changing consumer tastes. Great companies are nimble, no matter how large, and they change with the tides. While McDonald’s hasn’t been sitting pat, the larger issue is it could be facing something of an existential threat.

Younger customers, a key demographic for fast food operators, are staying away from the Golden Arches. The Wall Street journal reports the percentage of 19 to 21 year-olds who visit McDonald's monthly has plunged 13% since 2011. The journal also reports, according to data from Technomic, that customers in the 22 to 37 age range visiting monthly has been flat during the same period.

A multitude of factors could be at play, from a desire to eat healthier, be it shunning fat and calories, to a desire to eat non-processed fresh foods; or even avoiding the appearance of eating at place that some would consider unfashionable. McDonald’s is facing a big age problem here in the U.S., the question is, can they reverse the trend?

Jon Najarian, co-founder of optionMONSTER, believes changing tastes is driving consumption. “A lot of the kids want something a little healthier, and they’re willing, apparently, to pay for it,” he says in the attached video. “Chipotle (CMG) is more expensive, the crazy chicken [El Pollo Loco] is more expensive, and neither one of those is really fast food.”

Oddly enough, McDonald’s is also suffering from a slowly improving economy. “When people have to downgrade [when the economy worsens] they go to McDonald’s. So [consumers going elsewhere] is another sign that maybe the economy’s not so bad…We wish there was more job creation and wage inflation. There isn’t right now, but McDonald’s is feeling the pain from that, because people can upgrade.”

Despite its troubles, Najarian says McDonald’s stock is a buy here. “I think you do [buy the stock], especially for those seeking yield…and Europe is still a pretty big market for them.” Currency issues will soon fall into investors favor too, as the dollar’s run higher will reverse at some point, Najarian says. If you have a long-term time frame, Najarian believes McDonald’s is still a play for investors.

More from Investing:

How to use your vacation as stock research

Bull market still alive? Here’s 3 indicators to watch

Coffee, video games and...cloud-based computing?

Advertisement