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McDonald's off the menu amid global sales slump

Date
McDonald's has reported its first monthly sales drop in almost a decade.

McDonald's has reported its first monthly sales drop in almost a decade. Photo: Dominic O Brien

McDonald's has reported its first monthly drop in global sales in almost a decade as diners turn their backs on the golden arches in favour of its price-conscious competitors.

The fast-food giant reported a 1.8 per cent slump in sales during October, the first monthly decline since March 2003, sending its shares to a year low and presenting big challenges to its new CEO.

McDonald's is likely to answer the challenge with stepped-up promotions in response to resurgent rivals such as Burger King Worldwide Inc, Wendy's and Taco Bell, analysts said. Those chains have re-done their menus and beefed up "value" offerings to compete with McDonald's popular Dollar Menu.

Economy to blame

McDonald's is in many ways a victim of its own success said analysts, who for now are giving a pass to new CEO Don Thompson. Thompson took the helm at the world's biggest hamburger chain on July 1.

McDonald's for years has set the bar for growth by outpacing rivals and turning in strong sales despite modest consumer spending around the world.

The seller of Big Macs and Chicken McNuggets last month signalled an October sales decline because of the weak global economy, which has spurred intense competition in response to diners' diminishing appetite for spending money on restaurant food.

"This has nothing to do with Don being in charge. It's just a matter of bad timing and bad luck. They'll get through it," Edward Jones analyst Jack Russo said.

He predicted that McDonald's would respond with more promotions this month, but he also said superstorm Sandy, which hit the US Northeast at the end of October, was likely to weigh on November sales.

Global weakness

October sales at McDonald's restaurants fell 2.2 per cent in both the United States and Europe, but dropped 2.4 per cent in the Asia-Pacific region, Middle East and Africa.

With more than 34,000 locations around the world, McDonald's has far more purchasing and advertising muscle than many rivals, analysts said.

Still, it will be difficult for McDonald's to post higher same-restaurant sales for November and December because last year's results were so strong, analysts said.

McDonald's shares touched a 52-week low of $US85.64 on Thursday. They were down 1.2 per cent at $US85.79 in midday trading on the New York Stock Exchange.

October sales at McDonald's restaurants open at least 13 months fell 2.2 per cent in both the United States and Europe, and dropped 2.4 per cent in the Asia/Pacific, Middle East and Africa (APMEA) region.

While the sales declines were expected, they were steeper than Wall Street estimated in the United States and Europe.

McDonald's US market share losses "seem to have accelerated in recent months," Jefferies & Co analyst Andy Barish said in a note to clients.

Maccas not alone

Many US restaurant companies, including investor favorite Chipotle Mexican Grill and McDonald's, have reported cooling demand as diners get more frugal.

Just a few weeks ago, McDonald's posted its worst quarterly restaurant sales growth performance in nine years.

Those results come as Wendy's, the second-largest US hamburger chain, leaps weak year-ago results with help from a turnaround effort that includes re-doing both its menu and restaurants. On Thursday, that chain reported a 2.7 per cent increase in third-quarter sales at established company-operated restaurants in the United States.

Wendy's stock jumped 5.8 per cent to $US4.51.

Reuters

214 comments so far

  • I'm waiting for , " The McGFC Burger ".

    Commenter
    The Oracle
    Location
    Oberon
    Date and time
    November 09, 2012, 7:30AM
    • ha ha +1

      Commenter
      Simon
      Date and time
      November 09, 2012, 8:34AM
    • It has to do with the product not matching the wonderful pictures portrayed in their outlets and in anticipation opening the package and finding a microsized portion of what was portrayed, plus the fact they only employ young and we do not have a wide range age group of employees to cater well mannered for all cross sections of the community that might change their mind and come in as customers. Plus the last time I had a cheez burger I received 1 pce of pickle that I could unfold into four by a pair of tweezers.

      Commenter
      Pickled Herring
      Location
      Frankston
      Date and time
      November 09, 2012, 8:39AM
    • McDonalds is absolute junk. Go to your local corner takeaway instead and get a proper burger with the lot - lettuce, tomato, onions, beetroot, ( a real burger always has to have beetroot) pineapple, egg, bacon, cheese etc and served on a proper bread roll, not one full of sugar.

      And while your there get some proper thick cut chips with a dash of vinegar. You will never go back to Maccas after this I promise.

      Commenter
      8848m
      Date and time
      November 09, 2012, 9:07AM
    • It has nothing to do with the GFC....

      MacDonalds has reduced portion sizes whilst significantly increasing costs on small, medium and large meals, whilst simultaneously advertising gold coin snacks.

      Its a common trick with magicans. Shake something sparkly in front of our faces whilst with the other hand they perform the trick. In this case is a massive price increase.

      I'm amazed they thought we too stupid to notice a medium meal costing over $8 now, althewhilst the burger paddies and such have gotten smaller.

      Commenter
      1984
      Date and time
      November 09, 2012, 9:21AM
    • The economy probably isn't the problem. McDonalds have grown to a point where their product falls a long way short of their hype. Twice recently I've forked out for one their top of the range burgers and been served something akin to a train wreck.
      I'm pretty easy to please but these things were just rubbish. Politely complaining either in-store or online brings indifference or a standard line about how much they value my feedback.
      I've moved on. They're no longer a cheap meal option and their product quality is terrible.

      Commenter
      Luke
      Location
      Sydney
      Date and time
      November 09, 2012, 9:21AM
    • So if these burgers are so small and tiny, why do the carping dieticians and nutritionists get their knickers in twist complaining about them ??

      Commenter
      enno
      Location
      sydney
      Date and time
      November 09, 2012, 9:22AM
    • For me it's price...seriously, you can buy a decent burger for only a few dollars more. If McD's dropped the price of their food I might reconsider it. For me McD's has always been about cheap and nasty, something you stuff into your mouth during a road trip or at 3am after a night out. But the cheap seems to have gone...

      Commenter
      Bob
      Date and time
      November 09, 2012, 9:23AM
    • I stopped buying McDonalds food when they stopped selling Australian potatoes.

      Commenter
      Jiveturkey
      Location
      Sydney
      Date and time
      November 09, 2012, 9:25AM
    • McRippoff has been making people fat for years.

      Commenter
      McRippoff
      Date and time
      November 09, 2012, 9:53AM

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