McDonald's Corp. reported its first decline in monthly U.S. same store sales in nine years Thursday, as the chain began to suffer problems plaguing the rest of the fast food industry for several years.
Sales at restaurants open more than a year declined 2.2 percent. Same store sales also declined in Europe, 2.2 percent, and the Asia Pacific, Middle East and Africa region, 2.4 percent.
The chain cited lower demand and greater competition for the lower sales. While hamburger competitors Burger King and Wendy’s were walloped by the onset of the recession, both have changed hands in recent years and launched new menu items that better compete with McDonald’s including expanded breakfast offerings, improved coffee options and more innovative salads.
"Though October's sales results reflect the pervasive challenges of today's global marketplace, I am confident that our strategies and the adjustments we are making in response to the current business headwinds will build sales momentum and drive sustained, profitable growth," McDonald's CEO Don Thompson said.
Although the decline is historic for the world's largest restaurant chain, which has been on a roll since the beginning of its historic turnaround in 2003, it was not unexpected. Analysts have been tempering expectations and downgrading the stock for months.
To rev up sales, McDonald's has been working to emphasize value in markets around the world.
In the U.S., for example, McDonald's is stepping up advertising for its Dollar Menu after its attempt to market an "Extra Value Menu" for slightly higher prices fell flat. But the company said Thursday that the efforts were offset by "modest consumer demand" and competition.
In particular, McDonald's is facing stiffer competition from longtime rivals Burger King and Wendy's, which are both in the midst of reviving their brands with new ad campaigns and improved menus. Taco Bell, owned by Yum Brands Inc., is also enjoying growth with the help of new offerings such as it Doritos Locos Tacos and higher-end Cantina Bell bowls and burritos.
Stock slipped 0.99 percent in pre-market trades, to $86 in early trading. McDonald's hit an all-time high of $101.74 in February.
Baird analyst David Tarantino maintained an outperform rating on McDonald's, saying in a research note that, "We are cautiously optimistic that better trends can emerge as McDonald's gets past a wall of challenging comparisons in upcoming months."
Tarrantino added that though results "could remain soft" through early 2013, "we see opportunity for better performance to emerge in 2013 as a whole," because of emphasis on value offerings, lower ingredient costs, and reduced currency impact.
eyork@tribune.com | Twitter: @emilyyork
- Reuters contributed to this report
MCD Net Income Quarterly data by YCharts
McDonald's sales drop, first time since 2003
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McDonald's sales drop, first time since 2003
