McDonald's to Shut Crimean Outlets - Analyst Blog

The world's biggest hamburger chain McDonald's Corp. MCD recently announced its decision to exit the Ukrainian peninsula of Crimea, which has been at the center of a political crisis, ever since its sudden annexation by Russia. The company decided to close its three restaurants in the region, citing the suspension of financial and banking services in the country. It is currently evaluating the potential business and regulatory implications of the situation in Crimea. Reportedly, the company apprehends a backlash following a Russian politician's call for the closure of all its restaurants in Russia.

Though the company indicated that that the declaration has no connection with the political issues and is only a business decision, the move comes on the heels of intensifying tensions over Crimea and Ukraine between the West and Russia.

Russia's recent takeover of Crimea, which was a Ukrainian territory, triggered a sort of cold war, with the U.S. and the European Union imposing restrictions on Russia. Until last month Crimea was a part of Ukraine before Russia annexed the region together with the city of Sevastopol after a political upheaval in Ukraine.

Fears of a trade clash have worried companies as it clouds the prospects of businesses operating in the region. Though this Zacks Rank #3 (Hold) company intends to reopen stores in Crimea soon, it has offered its staff the option to re-locate to McDonald's restaurants in Ukraine and retain their positions.

With more than 7,500 outlets, Europe is the second largest region for McDonald's. Though the fast-food chain is trying to strengthen its position by offering value propositions and an innovative menu, it has become extremely vulnerable to macroeconomic headwinds like debt concerns in Europe. Any further issues would hurt the company's share in the region.

Some better-ranked stocks worth considering in the restaurant industry include Ignite Restaurant Group, Inc. IRG, The Wendy's Company WEN, Jack in the Box Inc. JACK. All these stocks sport a Zacks Rank #1 (Strong Buy).