Investors never like to see companies closing more locations than they are opening. The total number of McDonald’s Corp (NYSE: MCD) U.S. locations has been on the decline since 2014, but analysts say there’s a good explanation for the decline and McDonald’s will once again be expanding its U.S. footprint by 2020.
The total number of U.S. McDonald’s locations peaked at 14,350 back in 2014. Since that time, U.S. restaurant counts have steadily declined to 14,036 in 2017. Bank of America analyst Gregory Francfort expects that trend to continue through 2019, when he projects total U.S. restaurant count will dip to 13,905.
He says there are several trends that are impacting restaurant counts. McDonald’s has been closing its locations inside Walmart (WMT) superstores and has been reducing its presence in struggling shopping malls. Finally, opening new locations hasn’t been the top priority for McDonald’s in recent years. Instead, the company has been investing heavily in renovating its current locations in accordance with its Experience of the Future technology initiatives.
“We believe MCD’s current 0.8 percent closure rate will taper and flip to expansion in 2020 as a heavy shrink in Walmart and mall units ends and we get beyond an expensive reimage program,” Francfort says.
McDonald’s total number of U.S. mall locations has declined by more than 50 percent from 160 in 2012 to 74 in 2017. Francfort projects that decline will continue to 37 mall locations by 2022.
“The Walmart stores have short leases and we think are closing due to WMT not choosing to heavily reinvest in the brand refresh MCD is pushing,” Francfort says.
The total number of McDonald’s restaurants inside Walmarts has declined from 873 in 2012 to 638 in 2017. Francfort projects it will reach 513 by 2022.
Francfort says there’s no need for long-term investors to be alarmed at McDonald’s shrinking U.S. footprint. He projects the total number of U.S. McDonald’s locations will rebound from 2019 lows to 14,020 restaurants by 2022.
In the meantime, he says MCD stock is an excellent long-term opportunity.
“McDonald’s shares have…
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