Tuesday, March 10, 2015

McDonald’s Same Store Sales Drop 4% As Customer Demand Healthier Options

(Bruce Horovitz‘)  February was an ice-cold month for McDonald’s, with same-store sales dropping 4% in its troubled U.S. stores and 1.7% globally.
The burger giant announced the worse-than-expected results Monday, but its stock still posted a gain, closing up 0.6% to $97.71.
The monthly report will be the last to trace back to former CEO Don Thompson. He was replaced by Steve Easterbrook on March 1, and all sales reports going forward will technically fall under Easterbrook’s leadership, who already is under tremendous pressure to quickly right the ship.
The company seemed to concede as much in its statement that went out with Monday’s poor results. “Consumer needs and preferences have changed and McDonald’s current performance reflects the urgent need to evolve with today’s consumers, reset strategic priorities and restore business momentum,” the company said.
Beyond the disappointing U.S. numbers for stores open at least 13 months, monthly sales for the Asia/Pacific, Middle East and Africa region were down 4.4%. The only ray of light was Europe, where sales were up 0.7%.
“While changes are in the works, we cannot identify a near-term catalyst to spur sales,” says Sterne Agee analyst Lynne Collier in a note to investors.

The February results follow a strategic “Turnaround Summit” that executives held with franchisees last week in Las Vegas. The company made news at the summit by announcing plans to curtail the use of human antibiotics in its chicken over the next two years. At an investors’ conference last week, McDonald’s also said it planned to launch a mobile app this summer that may also be part of a loyalty program — a move the chain conceded some key fast-food rivals already have made.
One analyst says McDonald’s is admitting that its troubles run long and deep.
“It’s interesting that McDonald’s had a ‘Turnaround Summit’ last week in an effort to address its U.S. sales decline. The focus for the fast-food chain will be on enhancing the restaurant experience, which it hopes will help curb the decline,” says Joshua Raymond, chief market strategist at City Index UK. “The fact that the firm has openly stated this in their monthly sales statement and used the word ‘turnaround’ gives greater weighting to the issues they are facing.”
One large investment group, which last month sent a letter to McDonald’s directors calling for new membership and leadership of its board, said that beyond new management, McDonald’s still needs to revamp its board.
“We are hopeful Easterbrook can reverse this trend, but believe new vision must be injected at the board-level, too, if McDonald’s is to reposition itself to succeed globally and generationally,” said Dieter Waizenegger, executive director of the CtW Investment Group, in a statement.
In its own statement, McDonald’s spelled out its goal in no uncertain terms: “To be a true destination of choice around the world and reassert McDonald’s as a modern, progressive burger company.”

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