McDonald’s sees global sales drop trend continue

Posted by AFN Staff Writers on 11th March 2015
McDonald’s sees global sales drop trend continue
McDonald’s sees global sales drop trend continue

Global fast food restaurant chain McDonald’s has announced a decrease in global comparable sales of 1.7 per cent in February 2015, continuing a downward trend.

In the Asia Pacific region, the Middle East and Africa, sales decreased by 4.4 per cent during February 2015 and in the US, sales were down 4 per cent. Europe saw an increase in sales of 0.7 per cent during February 2015.

McDonald’s said its current performance reflected the “urgent need to evolve with today’s consumers, reset strategic priorities and restore business momentum”. The Company said consumer preferences had changed, and that the goal going forward would be to make McDonald’s a “true destination of choice around the world and reassert McDonald’s as a modern, progressive burger company”.

McDonald’s is the world’s leading global foodservice retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent franchise owners.

The Company announced a sales decrease of 1.8 per cent for January 2015. In January, sales in the US had increased by 0.4 per cent and in Europe by 0.5 per cent. However, January 2015 saw the Asia Pacific, Middle East and Africa regions record a decrease in sales of 12.6 per cent.

Australia reports positive results

McDonald’s said positive results in Australia, along with the shift in timing of the Chinese New Year in China and other markets in the region, partially offset a comparable sales decrease of 4.4 per cent in the Asia Pacific, Middle East and Africa regions.

The Company said the overall decline in these regions was due primarily to the broad-based consumer perception issues in Japan. McDonald’s said rebuilding brand trust by strengthening McDonald’s quality and value perceptions was one of the top priorities for 2015 for the Asia Pacific, Middle East and Africa regions.

Turnaround Summit held in US to ‘renew focus’

McDonald’s said its comparable sales in the US decreased in February 2015 because of ongoing aggressive competitive activity.

McDonald’s US began March 2015 with a ‘Turnaround Summit’, which the Company said was designed to “deliver renewed energy and focus” around the elements of the restaurant experience McDonald’s had identified as being most important to its customers: relevant, high-quality food and beverage offerings, compelling value and outstanding service from a trustworthy brand.

Joshua Raymond, Chief Market Strategist at City Index said the decline in US sales was the “most concerning” for the global restaurant chain, given that “much of this has been driven by increased competition in the space and provides a large weighting to the firm’s overall performance”.

“It’s interesting that McDonalds had a ‘Turnaround Summit’ last week in an effort to address its US sales decline,” Mr Raymond said. “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,” he said.

Europe benefits from new menu offerings

McDonald’s said the increase in comparable sales in Europe in February 2015 reflected positive performance in the UK and Germany, which were partly offset by negative results in Russia.

Amid Europe’s macro-economic headwinds, McDonald’s said it continued to pursue a balanced approach to driving the business through new menu offerings, emphasis on core menu favorites, and unique value options.

Other regions

Strong comparable sales in McDonald’s Other Countries & Corporate segment, which includes Latin America and Canada, contributed positively to the Company’s global comparable sales performance for the month.

Systemwide sales for the month decreased 8 per cent, or increased 0.5 per cent in constant currencies.

New CEO faces challenge to McDonald’s brand: Renovate or Back to Basics?

McDonald’s recently announced the retirement of its CEO Don Thompson, who has been with the Company for nearly 25 years. He was replaced by Steve Easterbrook on 1 March 2015. Mr Easterbrook was also elected to the Board of Directors, filling the vacancy created by Thompson.

Mr Thompson held the position of CEO for two-and-a-half years, and led the Company through a one of the worst years in its history. The new CEO will face the challenge of trying to turn the McDonald’s image around, from one of a Company that sells cheap, ‘unhealthy’ food, to one that emphasises food cooked with ‘real’ ingredients.

Some commentators have suggested that McDonald’s troubles could be indicative of wider problems for established Quick Service Restaurants (QSRs), in an environment where there exists a multiplicity of low start-up costs and low risk for new food businesses, who can introduce cheaper and better business models. Some of these include old-style street vendors, pop-up stores, home catering, one-off event vendors, food trucks, and ready-to-eat takeaway lines to supplement sit-down income.

Commentators have also suggested that restaurant companies such as McDonald’s face challenges from changing attitudes around fresh food, as well as campaigns such as anti-meat campaigns, anti-sugar and anti-obesity campaigns, which target high profile fast food outlets.

The new McDonald’s CEO Mr Easterbrook has previously led the UK and European business units for the Company. Andrew McKenna, non-executive Chairman of the McDonald’s Board of Directors, said that the McDonald’s Board was “confident” that Mr Easterbrook “can effectively lead the Company to improved financial and operational performance”.

“I am grateful to have had the opportunity to work with Don and congratulate him on his remarkable career at McDonald’s,” Mr Easterbrook said. “I am honored to lead this great brand, and am committed to working with our franchisees, suppliers and employees to drive forward our strategic business priorities to better serve our customers,” he said.

Prior to this promotion, Mr Easterbrook was Senior Executive Vice President and Chief Brand Officer, leading McDonald’s efforts to elevate its marketing, advance menu innovation, and create an infrastructure for its digital initiatives. A McDonald’s veteran, Mr Easterbrook previously served in key leadership roles across the company’s global business, including president of McDonald’s Europe.

In addition, Pete Bensen, Senior Executive Vice President and Chief Financial Officer, was promoted to the newly-created role of Chief Administrative Officer. In his new position reporting to Mr Easterbrook, Mr Bensen will oversee a number of functions supporting the Company’s operations. Kevin Ozan, who currently serves as Senior Vice President and Corporate Controller, has succeed Mr Bensen and was promoted to Executive Vice President and Chief Financial Officer.

As CFO, Mr Ozan will report to Bensen and will be responsible for managing the global financial organisation and leading the development and execution of the Company’s fiscal strategies. Mr Ozan brings broad financial experience and has held senior-level positions in the Company’s Finance, Investor Relations and Accounting departments with assignments in both the US and European markets.