Ahead of McDonald’s announcement of its Q4 fiscal l results today (24 January), analysts were not expecting great things. In fact, the earnings of the world’s largest fastfood chain are forecast to fall a little flat.


There are three predominant reasons for the distinct lack of profit buoyancy at the US corporation. The BSE scare in Europe has had an extremely negative effect on the sales of beef patties, and the company’s carefully preserved reputation took a dent when a mad cow was uncovered at its important Italian supplier, Cremonini.


Long-term foreign growth, far away from its Oak Brook base, has also been blamed for a warning issued by the company that it may shave 2 cents a share off its full year results. The impact of a strong US dollar highlights how the overseas growth makes the company liable to fluctuations in exchange rates.


Similarly, there is still hope that a rebound in the euro could make up for the negative effect of mad cow disease on mainland European sales.


The final key reason is the fact that its new customised production system has yet to show results. The first test for the “Made for You” system, which was installed in around 13,000 US outlets over a year ago, is the new rotating menu “New Tastes.” Plans to launch this menu were revealed this month, adding more control to regional operators.


In the US market, competition is great for McDonald’s and slow retail spending is also pressuring results. Add this to pressure from the negative impact of BSE and exchange rates, and the fine-tuning needed in its customised production system however, and the summary of Tim Ghriskey, head of value investing at Dreyfus Corp seems apposite: “[the] pure fundamentals certainly don’t look spectacular.”