22-10-2014, 08:05 AM
McDonald’s posts earnings drop, says it’s facing ‘formidable’ challenges
DOW JONES OCTOBER 22, 2014 7:48AM
McDonald’s is struggling to improve sales and admits it’s lost relevance for some customers. Source: AFP
MCDONALD’S Corp has promised significant changes after reporting a worse-than-expected 30 per cent drop in third-quarter earnings and calling its challenges “more formidable than expected.”
The world’s largest restaurant company has struggled to improve sales lately, and chief executive Don Thompson has said the company has lost relevance with some customers and needs to strengthen its menu offerings.
“By all measures, our performance fell short of our expectations,” Mr Thompson said.
He cited a variety of factors for the declines — a higher effective tax rate, unusual events in Asia and Europe, and continued underperformance in the US, its largest geographic segment.
“The internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter,” Mr Thompson said, adding that he expects negative same-store sales worldwide in October.
“These significant challenges call for equally significant changes in the way we do business.”
Shares of McDonald’s, down 3.2 per cent over the past year to yesterday, fell 2 per cent in pre-market trading.
McDonald’s has faced challenges around the globe, ranging from a meat supplier scandal in China to store closures in Russia on alleged sanitary violations. McDonald’s in August posted its weakest monthly sales results in more than a decade.
The chain has focused on improving staffing at busy times and emphasising its breakfast and coffee offerings as it has lost traction with a key group of consumers — millennials, or those in their mid-teens to mid-30s — to fast casual restaurants that offer fresher fare.
Overall, McDonald’s reported a profit of $US1.07 billion, or $US1.09 a share, compared with $US1.52 billion, or $US1.52 a share, a year earlier.
McDonald’s said last month that the supplier scandal in China would reduce its earnings in the quarter by about 15 cents to 20 cents a share. The company has struggled to regain confidence in Asia after Chinese authorities accused a Chinese supplier this summer of intentionally selling expired meat to McDonald’s and other fast-food outlets.
Revenue fell 5 per cent to $US6.99 billion.
Analysts polled by Thomson Reuters had expected earnings of $US1.37 a share and revenue of $US7.18 billion.
Sales at restaurants open more than a year fell 3.3 per cent globally in the quarter. Consensus Metrix had estimated a 3 per cent decline globally.
Same-store sales in the US fell 3.3 per cent, slightly above estimates for a nearly 3 per cent decline. McDonald’s has struggled in the US as a complicated menu slowed service and young customers left in favour of fast casual chains. The company has been bringing back former executives in recent months as it attempts to stabilise the segment.
In Europe, same-store sales fell 1.4 per cent, compared with expectations for a less than 1 per cent drop, as weakness in Russia, Ukraine and Germany offset strong UK performance.
The Asia/Pacific, Middle East and Africa region’s same-store sales fell 9.9 per cent, dragged by the Chinese supplier issue, but still better than analyst expectations for an 10.6 per cent decline.
For September, the company reported Tuesday a 3.8 per cent drop in global same-store sales, after posting its weakest monthly sales in more than a decade in August. Same-store sales fell 7.5 per cent in its Asia/Pacific division in September, while sales in the US fell 4.1 per cent.
Dow Jones
DOW JONES OCTOBER 22, 2014 7:48AM
McDonald’s is struggling to improve sales and admits it’s lost relevance for some customers. Source: AFP
MCDONALD’S Corp has promised significant changes after reporting a worse-than-expected 30 per cent drop in third-quarter earnings and calling its challenges “more formidable than expected.”
The world’s largest restaurant company has struggled to improve sales lately, and chief executive Don Thompson has said the company has lost relevance with some customers and needs to strengthen its menu offerings.
“By all measures, our performance fell short of our expectations,” Mr Thompson said.
He cited a variety of factors for the declines — a higher effective tax rate, unusual events in Asia and Europe, and continued underperformance in the US, its largest geographic segment.
“The internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter,” Mr Thompson said, adding that he expects negative same-store sales worldwide in October.
“These significant challenges call for equally significant changes in the way we do business.”
Shares of McDonald’s, down 3.2 per cent over the past year to yesterday, fell 2 per cent in pre-market trading.
McDonald’s has faced challenges around the globe, ranging from a meat supplier scandal in China to store closures in Russia on alleged sanitary violations. McDonald’s in August posted its weakest monthly sales results in more than a decade.
The chain has focused on improving staffing at busy times and emphasising its breakfast and coffee offerings as it has lost traction with a key group of consumers — millennials, or those in their mid-teens to mid-30s — to fast casual restaurants that offer fresher fare.
Overall, McDonald’s reported a profit of $US1.07 billion, or $US1.09 a share, compared with $US1.52 billion, or $US1.52 a share, a year earlier.
McDonald’s said last month that the supplier scandal in China would reduce its earnings in the quarter by about 15 cents to 20 cents a share. The company has struggled to regain confidence in Asia after Chinese authorities accused a Chinese supplier this summer of intentionally selling expired meat to McDonald’s and other fast-food outlets.
Revenue fell 5 per cent to $US6.99 billion.
Analysts polled by Thomson Reuters had expected earnings of $US1.37 a share and revenue of $US7.18 billion.
Sales at restaurants open more than a year fell 3.3 per cent globally in the quarter. Consensus Metrix had estimated a 3 per cent decline globally.
Same-store sales in the US fell 3.3 per cent, slightly above estimates for a nearly 3 per cent decline. McDonald’s has struggled in the US as a complicated menu slowed service and young customers left in favour of fast casual chains. The company has been bringing back former executives in recent months as it attempts to stabilise the segment.
In Europe, same-store sales fell 1.4 per cent, compared with expectations for a less than 1 per cent drop, as weakness in Russia, Ukraine and Germany offset strong UK performance.
The Asia/Pacific, Middle East and Africa region’s same-store sales fell 9.9 per cent, dragged by the Chinese supplier issue, but still better than analyst expectations for an 10.6 per cent decline.
For September, the company reported Tuesday a 3.8 per cent drop in global same-store sales, after posting its weakest monthly sales in more than a decade in August. Same-store sales fell 7.5 per cent in its Asia/Pacific division in September, while sales in the US fell 4.1 per cent.
Dow Jones