Friday, November 9, 2012

NewsDaily: McDonald's Oct restaurant sales fall, first in nine years

McDonald's posts first monthly global sales drop in nine years


By Lisa BaertleinPosted 2012/11/08 at 1:15 pm EST

Nov. 8, 2012 (Reuters) ? McDonald's Corp reported a global 1.8 percent drop in sales at established restaurants for October - its first monthly sales fall since March 2003 - sending its shares to a year low and presenting big challenges to the fast-food chain's new CEO.

A McDonald's sign is shown at the entrance to one of the company's restaurants in Del Mar, California September 10, 2012. REUTERS/Mike Blake


McDonald's is likely to answer the challenge with stepped-up promotions in response to resurgent rivals such as Burger King Worldwide Inc , Wendy's Co and Yum Brands Inc's.N> Taco Bell, analysts said. Those chains have re-done their menus and beefed up "value" offerings to compete with McDonald's popular Dollar Menu.

The seller of Big Macs and Chicken McNuggets last month signaled an October sales decline because of the weak global economy, which has spurred intense competition in response to diners' diminishing appetite for spending money on restaurant food.

McDonald's is in many ways a victim of its own success said analysts, who for now are giving a pass to new Chief Executive Don Thompson. Thompson took the helm at the world's biggest hamburger chain on July 1.

McDonald's for years has set the bar for growth ever higher by outpacing rivals and turning in strong sales despite modest consumer spending around the world.

"This has nothing to do with Don being in charge. It's just a matter of bad timing and bad luck. They'll get through it," Edward Jones analyst Jack Russo said.

He predicted that McDonald's would respond with more promotions this month, but he also said superstorm Sandy, which hit the U.S. Northeast at the end of October, was likely to weigh on November sales.

With more than 34,000 locations around the world, McDonald's has far more purchasing and advertising muscle than many rivals, analysts said.

Still, it will be difficult for McDonald's to post higher same-restaurant sales for November and December because last year's results were so strong, analysts said.

McDonald's shares touched a 52-week low of $85.64 on Thursday. They were down 1.2 percent at $85.79 in midday trading on the New York Stock Exchange.

GLOBAL WEAKNESS

October sales at McDonald's restaurants open at least 13 months fell 2.2 percent in both the United States and Europe, and dropped 2.4 percent in the Asia/Pacific, Middle East and Africa (APMEA) region.

While the sales declines were expected, they were steeper than Wall Street estimated in the United States and Europe.

McDonald's U.S. market share losses "seem to have accelerated in recent months," Jefferies & Co analyst Andy Barish said in a note to clients.

Analysts, on average, had expected a 1.05 percent fall in the United States, a 0.69 percent decline in Europe and a 3.01 percent drop for the APMEA region, according to Consensus Metrix. The United States just edges out Europe as McDonald's largest market for sales.

Many U.S. restaurant companies, including investor favorite Chipotle Mexican Grill and McDonald's, have reported cooling demand as diners get more frugal.

Just a few weeks ago, McDonald's posted its worst quarterly restaurant sales growth performance in nine years.

Those results come as Wendy's, the second-largest U.S. hamburger chain, leaps weak year-ago results with help from a turnaround effort that includes re-doing both its menu and restaurants. On Thursday, that chain reported a 2.7 percent increase in third-quarter sales at established company-operated restaurants in the United States.

Wendy's stock jumped 5.8 percent to $4.51.

(Reporting By Brad Dorfman in Chicago and Lisa Baertlein in Los Angeles; Editing by John Wallace and Maureen Bavdek)

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Source: http://www.newsdaily.com/stories/bre8a70pz-us-mcdonalds-sales-october/

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