McDonald's Sales Slowed in U.S., Europe, Asia in July
08/08/2012| 08:46am US/Eastern
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By Annie Gasparro and Chelsea Stevenson
--Global same-store sales flat in July; declines in all three main regions
--Analysts expected growth of 2.3%, according to Consensus Metrix
--Shares fell 1.7% to $87.53 in Wednesday trading
McDonald's Corp. (>> McDonald's Corporation) said sales at its restaurants open at least 13 months didn't increase in July compared with last year, mostly because weak consumer confidence caused slowdowns in its three main regions.
McDonald's global same-store sales were flat for the month, with declines in the U.S.; Europe; and Asia/Pacifc, Middle East and Africa offset by continued growth in its smaller "other countries' category, which includes Canada and Latin America.
McDonald's--the world's largest fast-food chain--has touted its scale, efficiency and diverse menu for its ability to increase profit even in tough economic times. But two weeks ago, the company warned that it is seeing consumer confidence issues, which were once concentrated in Southern Europe, spreading world-wide and damping traffic at its burger shops.
If McDonald's, which is cited for its ability to attract a budget-conscious crowd, is feeling the effects of global economic troubles, then it is likely other fast-food chains, such as Yum Brands Inc. (>> Yum! Brands, Inc.), and especially pricier concepts, like Chipotle Mexican Grill Inc. (>> Chipotle Mexican Grill, Inc.), are also taking a hit.
McDonald's shares fell 1.7% to $87.53 in Wednesday trading, as analysts expected 2.3% global same-store sales growth, according to Consensus Metrix. Two weeks ago, McDonald's said its global same-store sales would be positive in July, though below the second quarter's 3.7% growth rate.
By region, McDonald's same-store sales edged down 0.1% in the U.S., 0.6% in Europe, and 1.5% in the Asia/Pacific, Middle East and Africa, or APMEA, region. Analysts were expecting growth in each, according to Consensus Metrix.
The company doesn't break out monthly sales data for its "other countries" category, but that category seems to have helped boost McDonald's global growth to flat from the decline it saw in the three major regions.
Newly appointed Chief Executive Don Thompson has said that the struggling economy is pressuring McDonald's to "crank up" its marketing and promote value more than it already does. The strategy will weigh on its profit margin in the near future, but McDonald's says it is vital for garnering customer traffic and loyalty in the long run.
The company is trying to lure customers with an "extra value menu" in the U.S., which includes items priced at around $1 to $2. It also is adding value menus in Australia and Japan, and being more cautious with its menu price increases the rest of the year.
In the U.S., McDonald's July same-store sales decline was the worst performance it has seen in two and a half years, indicating that Americans are spending less money on snacking and eating out. McDonald's said its summer promotions didn't overcome the effects of the sluggish economy.
In Europe, McDonald's said strong results in the U.K. and Russia were more than offset by weaker performance in Germany and several Southern European markets amid an increasingly difficult environment.
In APMEA, positive results in Australia were outweighed by ongoing weakness in Japan and a negative impact from a shift in timing of Ramadan.
Write to Annie Gasparro at annie.gasparro@dowjones.com and Chelsea Stevenson at chelsea.stevenson@dowjones.com
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