McDonalds Corp reported its worst monthly decline in US same-store sales since 2001 and said that such performance is expected to have a negative impact on its fourth-quarter results.
The companys US sales have decreasing since May, prompting management to take action in McDonalds most important market. The Novembers decline of 4.6% in same-store sales, up from the 1% drop in October, was way above analysts projections of 1.9% decrease.
Analysts predicted a 1.7% decrease in global sales for the burger giant, however, the company reported that overall comparable sales fell 2.2%, including drops of 2% in Europe and 4% in Asia/Pacific, Middle East and Africa or APMEA. The company blamed “strong competitive activity” for the disappointing results.
“Todays consumers increasingly demand more choice, convenience and value in their dining-out experience,” said McDonalds CEO Don Thompson.
McDonalds are losing customers to the so-called “fast casual” food outlets, which offer better-for-you cuisine, and gourmet burger outlets. Obesity and growing health concerns among the US population has also dented the fast-food restaurant chain.
The company said that it had positive results from it operations in the UK, however, they were offset by the very weak results in Russia and negative results in France and Germany. Meanwhile, APMEAs reports reflected the “ongoing impact of the supplier issue on performance” in Japan and China, which was partially offset by the positive results in Australia.
“Each of our geographic segments is focused on regaining business momentum by prioritizing initiatives to improve comparable sales performance in the near-term, while developing innovations to deliver sustained profitable growth through McDonalds Experience of the Future,” said Mr. Thompson.
In October, after the company reported Q3 results below expectations, Mr. Thompson initiated an aggressive move that he described as “decisive action to fundamentally change”, including upgraded menus, stores, service and technology and reminded that McDonalds has implemented Apples new payment system.
Under the plan McDonalds would be opening fewer restaurants this year and reducing its spending by $200 million to $300 million. The company is also launched a US advertising campaign called “Our food. Your questions.” with hopes to erase customers bad perceptions about its foods ingredients.
McDonalds Corp gained 0.68% on Friday, but lost 3.84% on Monday and closed at $92.61, marking a one-year decrease of 4.33%. The company is valued at $90.13 billion. According to the Financial Times, the 18 analysts offering 12-month price targets for McDonalds Corp have a median target of $97.00, with a high estimate of $110.00 and a low estimate of $86.00. The median estimate represents a 4.74% increase from the last price of $92.61.
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