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McDonald's monthly sales worst in more than 10 years

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McDonald's posts worst monthly sales since March 2003
$MCD U.S. comparable sales down in 8 of the last 9 months
McDonald's says it faces "broad-based challenges" in U.S.

McDonald’s Corp. served up a disappointing July, largely due to food-safety concerns in Asia as well as widespread problems in the United States, the world’s largest restaurant company said on Friday.

For the second time this week, McDonald’s said that this year’s sales forecast “is now at risk” to be reduced further.

Sales at longstanding McDonald’s restaurants around the globe fell 2.5 percent last month, the company said. Same-store sales, or sales at restaurants open at least 13 months, fell 3.2 percent in the United States and fell 7.3 percent in the Asia/Pacific, Middle East and Africa region, or what the company calls APMEA.

Analysts had anticipated a 1.1 percent decline overall, with a 2.6 percent drop in the United States and a 0.5 percent decline in APMEA, according to Consensus Metrix.

July’s 2.5 percent decline in global comparable sales matched McDonald’s performance in June. Those are the worst comparable sales McDonald’s posted since March 2003, when its global comparable sales plunged 3.7 percent.

Shares of Oak Brook-based McDonald’s fell 21 cents to $93.10 in trading on Friday.

McDonald’s had already warned on Monday that its full-year sales forecast may have to come down because of a variety of factors that had worsened from when it reported quarterly results on July 22. On Friday, the company again said that its 2014 same-store sales forecast – which called for relatively flat same-store sale -- “is now at risk.”

Janney analyst Mark Kalinowski said he now expects McDonald’s annual global comparable sales to decline by 0.3 percent. If such sales fall, 2014 would mark the company’s weakest annual sales performance since 2002, Kalinowski said.

In the United States, McDonald’s said it struggled in part because it had a big Monopoly event running in July 2013. At the same time, this year the chain was promoting premium beef and chicken options, which may have turned off some value-conscious diners. Currently, McDonald’s is promoting fare such as a $2 Jalapeno Double burger on its “Dollar Menu & More” board.

McDonald’s U.S. same-store sales have now fallen in eight of the past nine months.

Meanwhile, rivals have fared better. On Aug. 1, Burger King Worldwide Inc. posted its third consecutive quarter of same-store sales growth in the United States and Canada. And on Aug. 7, Wendy’s said its quarterly same-store sales rose more than 3 percent.

On July 20, a Shanghai Husi Food plant in China was shut down after a Chinese TV report showed workers picking up meat from a factory floor, as well as mixing meat beyond its expiration date. The plant, owned by Aurora-based OSI Group, had been a supplier to some of McDonald’s restaurants in China and to other major chains there, including Yum Brands.

McDonald’s said its performance in China, Japan and certain other markets fell significantly after the food safety issue. The markets affected represent about 10 percent of the company’s global systemwide sales.

Government and internal investigations at the supplier are proceeding.

Earlier this week, OSI said that withdrawing products produced at the plant was proceeding smoothly and that six Shanghai Husi employees had been detained by the Shanghai branch of the Public Security Bureau.

One bright spot for McDonald’s was Europe. Same-store sales there rose 0.5 percent, topping analysts’ forecast of a 0.7 percent decline. However, McDonald’s said comparable sales were down in Germany and Russia.

jwohl@tribune.com

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Copyright © 2014, The Baltimore Sun
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