The Daily Dose: Biting Views on the News

 | Nov 22, 2013 | 10:00 AM EST
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Yes, I am still in full-on beast mode, updating my stock coverage universe for clients. However, the email box lit up with comments on Thursday on two buzzy topics. Since I am not one to report news and regurgitated items found in financial statements, here is some analysis behind interesting stories of the day.

Battle: McDonald's Workers vs. Mean Corporate

McDonald's (MCD) is always a target, from its supersized caloric menu to its industry-worst drive-thru time (184 seconds). But more recently, the odd messages from headquarters to the people that keep this giant food machine humming have dominated. Why are these messages so odd? In my view, they are completely detached from the humble upbringing of Don Thompson, CEO of McDonald's. Here is a man who lived in rough part of town as a child, saved up pennies and nickels as a teen, and was helped by his grandmother to attend Purdue University. So when you hear of messages from HQ that on the surface seem sympathetic to employees, but really aren't, one has to wonder what the deal is?

McDonald's workers win in this battle with a convincing, valid gripe.

Here are three reasons:

  1. Each employee at McDonald's is given the type of training/skills that is non-transferable to industries with higher pay. If McDonald's is not going to produce well-rounded workers that could rise up its corporate ladder, or get ahead elsewhere, there should be more money in the paycheck each week to compensate.
  2. Since 2010, McDonald's has greatly expanded its menu to include higher-profit-margin items, ranging from faux Starbucks coffee to smoothies. If McDonald's is making more profit on each transaction, especially during a time of deflation (as seen in this week's CPI report), why shouldn't employees get more consistent raises? Then they could take the vacation HQ is suggesting as a means to improve their mental and physical health.
  3. McDonald's more than ever before is creating the type of workload stress that is causing employee burnout. In 2014, it will roll out a second drive through window. There is a focus on speeding up drive-thru times. Newly-remodeled stores require more cleaning, not to mention hanging all of the silly marketing the company sends down from HQ to hang outside (for example, dollar menu signs on fences). McDonald's is essentially beating its employees into the ground, almost as if to say "Hey, we know you can't go anywhere else, so deal."

Three Quick Stats to Know

  • McDonald's U.S. sales have underperformed Chipotle (CMG), Panera (PNR), and Starbucks (SBUX) (its new competitors post fancy remodels) since the second quarter of 2012. The message: low wages and scant hours are backfiring, causing mistakes in food prep and the need to hire/train new people that are slower than the veterans.
  • 80% of McDonald's workers are part-time.
  • Half of the worker base doesn't even qualify for paid vacation!

Old School Retail Ready to Take Out Amazon This Holiday Season

Amazon (AMZN) is the crowned winner of the holiday season, all of the time. With 50% of the U.S. population having a smartphone, which puts Amazon inventory just a click away, the company would seem prepared to dominate once again. I say hold your horses.

Here are three reasons why:

  1. Best Buy (BBY), Target (TGT), and Wal-Mart (WMT) have greatly improved their websites this year. Best Buy has added shop in shops for its top brands on its site, as well as a new rewards program. The company also prices matches, which has improved close rates in the store. Target is rocking on driving social media engagement, and has recently unveiled a neat website function called "Cartwheel" to encourage repeat sales. Wal-Mart is now shipping goods from its stores to people who order online (industry trend, Macy's (M) doing this as well). Further, Wal-Mart and Target now have tech labs in Silicon Valley to keep them ahead of a company such as Amazon.
  2.  Brick-and-mortar retailers are ramping up their marketing efforts in a big way this holiday season, putting more money behind social media and weekly TV ads. In retail jargon, this is called "increasing share of mind."
  3. There are a host of new electronics items out there this holiday season that require one on one customer service. For example, 4D TVs need store customer service on how to hookup and what cables to use. Best Buy has added experience shops in its store to test the new gaming consoles. Mobile technology, from Apple (AAPL) to Microsoft (MSFT), has reached a point where the price almost makes someone feel as if they deserve customer service so they get all of the use from the device.

One Economic Takeaway From Target's Earnings

  • The number of transactions has now fallen for four straight quarters, more acutely in the third quarter as Target took up its average selling price. What does this suggest: even the wealthier Target (average: $50,000 annual income) customer remains very mindful of their spending, and isn't exactly in the most amazing financial position.

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