McDonald’s Corp., the world’s largest restaurant chain, posted the worst same-store sales decline in more than a decade, hurt by sluggish demand in the US and a health scare involving a Chinese supplier.
Sales at stores open at least 13 months fell 3.7 per cent in August, the Illinois-based company said in a statement today.
McDonald’s, which has more than 14,200 US locations, is facing challenges at home and abroad. Domestically, it’s been relying on discounts, limited-time offers and remodelled stores in a failed attempt to reignite growth. In China, meanwhile, the company’s meat supplier OSI Group LLC was investigated for changing the expiration dates on food, triggering shortages and a sales slump.
US same-store sales dropped for the fourth straight month in August, falling 2.8 per cent. Analysts projected a 2 per cent decrease, the average of projections from Consensus Metrix.
US Competition
In the US, the chain has been trying to lure diners with $2 jalapeno burgers and 20-piece Chicken McNuggets for $5. There’s also been steeper competition as rivals, including Burger King Worldwide Inc. and Taco Bell, advertise value meals and cheap breakfast fare. In August, the company said Mike Andres will take over as president of US operations when Jeff Stratton retires next month.
Same-store sales in the company’s Asia Pacific, Middle East and Africa division dropped 14.5 per cent last month. Analysts projected a 10.1 per cent drop. Japan same-store sales tumbled 25 per cent in August following the food safety scare.
Earlier this month, the company said it appointed a China food safety chief and is stepping up audits of suppliers there after it had to pull products.
Same- or comparable-store sales are considered an indicator of a retailer’s performance because they include only older, established units.
McDonald’s is scheduled to release third-quarter earnings on 21 Oct.
Europe Decline
Sales fell 0.7 per cent in Europe, where McDonald’s gets about 40 per cent of its revenue. Analysts estimated a 2.1 per cent decrease, according to Consensus Metrix, owned by Kaul Advisory Group in Wayne, New Jersey.
The restaurant chain is also facing pressure in Russia, where consumer-safety regulators have recently ordered restaurants to temporarily close because of violations of sanitary rules. More than 100 McDonald’s stores are being inspected and could be under threat of being closed.
Bloomberg News, edited by Hospitality Ireland
