The 1 Big Reason Arcos Dorados Is Crashing in 2012

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Today, analyst Austin Smith discusses why Arcos Dorados is struggling in 2012, down about 30% on the year. Essentially, the company's issues boil down to the larger challenges facing the Brazilian economy, which accounts for around 50% of Arcos' sales. As Brazilian inflation rises and productivity declines, the Arcos market contracted. The Brazilian currency devaluation especially hurt the company, forcing it to lose money on currency exchanges in four out of the last five quarters. But in the long term, Arcos remains invested in high-growth economies and should be able to capitalize that into a healthy bottom line.

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At the time this article was published Austin Smith owns shares of McDonald's. The Motley Fool owns shares of McDonald's and Starbucks. Motley Fool newsletter services recommend McDonald's, Starbucks, and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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