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McDonald's (MCD) Set to Further Expand Footprint in Russia

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Reportedly, McDonald’s Corporation (MCD - Free Report) plans to expand operations in Russia by opening over 50 new restaurants in the country in 2017.

Last year, the company opened 73 restaurants in Russia, surpassing its own forecast. Of these, 65 were company-owned outlets, while the remaining locations were franchised.

McDonald’s boasts a large presence in Russia with 609 outlets currently in operation. Out of these, around 92 are operated by franchisees. However, of late, the company has been dealing with varying macroeconomic pressures and general economic volatility in the markets therein.

Notably, Russia's agriculture economy has been witnessing improvement since 2014 when international sanctions were imposed, forcing the country to rely on its internal supply. Thus, the company aims to increase the share of local suppliers to its Russian stores up to 100% compared with the current level of 85%, by the end of 2018. Additionally, it has been encouraging suppliers to develop production in Russia, which is expected to shield the company from currency swings and any import restrictions.

The plan to expand footprint in Russia underlines the company's bid to fortify the brand’s global presence. McDonald’s is the world’s largest chain of fast-food restaurants serving more than 100 countries. Its offerings have also reached the billion-dollar brand status through sustained product innovation and geographic expansion. Moreover, with an almost 10% share of the global informal eating out market, there is an ample scope for the company to grow in the future as it boasts a scale advantage over its peers.

Furthermore, McDonald’s aims to register growth by increasing restaurant visits, providing value, innovating new menu items, re-imaging its restaurants and market campaigns. On the back of these initiatives, the company outpaced the Zacks categorized Retail-Restaurants industry’s growth over the past six months. While the industry recorded a loss of 3.5%, the company gained 4.2% in the same time frame. Also, recently, the company reported better-than-expected fourth-quarter 2016 results.

However, sluggish industry growth in the U.S., macroeconomic concerns in various parts of the world and negative currency translation, remain potent headwinds to the company’s overall performance. Nevertheless, such robust expansion plans bode well and should give impetus to its growth prospects.

Zacks Rank & Stocks to Consider

McDonald’s currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Retail-Restaurants space include:

Dave & Buster’s Entertainment, Inc. PLAY sports a Zacks Rank #1 (Strong Buy). It has seen current-year estimates rise by 6.2% over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bob Evans Farms, Inc. BOBE is a Zacks Rank #1 company. Its earnings have surpassed the Zacks Consensus Estimate in all of the last four quarters with an average beat of 14.74%.

Wingstop, Inc. WING carries a Zacks Rank #2 (Buy). It posted positive earnings surprises in all of the last four quarters, with an average beat of 11.99%.

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McDonalds Corporation (MCD) - free report >>

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