McDonald's (MCD) executive management is finding its own discount menu as the company cruises past trade and tax impositions.
Shares of the fast food giant declined slightly on Tuesday, falling by 0.57% to $183.60, but shareholders might be pleased to hear that executives have been able to mitigate macroeconomic impacts quite deftly.
As more volatility may indeed lay ahead in 2019, the company's history of maneuver past potential pressures is a positive for shareholders.
Taxes Aren't a Certainty
Most recently, McDonald's proved itself an amazing defendant in Europe.
The company managed to fend off EU regulators in a case that decided that the non-taxation of profits in a Luxembourg-based subsidiary did not constitute illegal state aid.
"Our in-depth investigation has shown that the reason for double non-taxation in this case is a mismatch between Luxembourg and U.S. tax laws, and not a special treatment by Luxembourg," EU Commissioner Margrethe Vestager said. "Therefore, Luxembourg did not break EU State aid rules."
Though she added that she wished that legislative action be taken by the Luxembourgish government, the burger behemoth still managed to avoid the added EU tax that has fallen on so many of its contemporary corporate titans.
"This is quite remarkable as in all previous decisions on State Aid in tax matters, the EU Commission has concluded that illegal State Aid was present," Oliver Hoor, Partner of International and Corporate Tax at ATOZ Tax Advisors. "In all these other cases, the countries concerned have reached out to the Court of Justice of the European Union to file a claim to challenge the Commission's decision."
Hoor provides a diagram of the scheme here to explain the peculiar decision from the court.
Conquering Chinese Challenge?
Aside from the tax impact that has recently come to mind, the macroeconomic realities of the Trump administration's trade policy have begged questions of the company.
The questions result largely due to the company's significant interest in China, where it operates thousands of restaurants, represented below:
Luckily for shareholders, McDonald's CEO Steve Easterbrook noted that the company's supply chains are largely domiciled in the countries they occupy.
"Most of our basket goods is locally sourced," he explained to CNBC. "At the moment we don't feel significantly exposed."
Still, that's not to say that the Chinese consumer will be happy to keep chowing down on big macs if it is deemed unpatriotic. As has been seen with Apple (AAPL) and Huawei, Chinese consumers can quickly turn on a product that is seen as against national interest.
McDonald's has already seen this trend to a degree in its recent quarterly releases, something that should only stand to increase if trade tensions continue to escalate.
As perhaps the most iconic symbol of America next to Coke (KO) , McDonald's could be one of the largest casualties of any type of consumer driven cuts that would kill profits despite any mitigation by executives.
So, while the company may have proven itself a deft negotiator and litigator, it may be relying on the author of The Art of the Deal to pacify its patriotic Chinese consumer base.