Goldman Sachs Says McDonald's Is Losing Ground

McDonald's Corporation (NYSE: MCD) is losing ground to competitors and its turnaround efforts may cause further short-term sales declines, an analyst said Monday.

Goldman Sachs' Karen Holthouse resumed coverage on the fast-food giant Monday with a Neutral rating and $90 target. McDonald's is down more than 4 percent year-to-date and changed hands recently at $92.93, down 3.5 percent.

McDonald's on Monday posted a same-store global sales decline of 2.2 percent for November and said its "negative top-line performance will significantly pressure" margins. The company hasn't posted growth in same-store sales in more than a year.

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Even if McDonald's can improve perceptions about its food, success will take time and in the meantime risks lower same-store sales figures, Holthouse said in a research note.

Longer term, the company may also "face a tradeoff of addressing either the value customer or the growing 'real food' customer," Holthouse said.

McDonald's troubles "were masked for years" by strong franchise growth and its ability to offer cheap prices. Also in its favor: a huge marketing budget and a stable breakfast business.

Moreover, in recent years key McDonald's competitors have experienced "generally tumultuous periods of leadership and ownership," Holthouse said.

Holthouse worries that McDonald's is getting hurt by the growing popularity of what she called "real food."

"The trend is likely only going to become more important with the growing purchasing power of Millennials," Holthouse said.

Although McDonald's has plans to address its problems, with a greater emphasis on fresh food, Holthouse said its timeline for completion by the end of 2016 is a "best case scenario."