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

11/9/2012

CHICAGO — McDonald's Corp. is having trouble stomaching the competition.

The world’s biggest hamburger chain said Thursday that a key sales figure fell for the first time in nearly a decade in October, as it faced a challenging economy abroad and intensifying competition at home. The company, based in Oak Brook, Ill., saids global revenue at restaurants open at least 13 months fell 1.8 percent for the month. The last time it dropped was in March, 2003.

The figure is a snapshot of money spent on food at both company-owned and franchised restaurants and does not reflect corporate revenue.

Chief Executive Officer Don Thompson cited the “pervasive challenges of today’s global marketplace” for the declines.

After years of outperforming its rivals, McDonald’s has been hitting some road bumps recently, with longtime rivals such as Burger King and Wendy’s Co. reviving their brands with improved menus and new TV ad campaigns. (Wendy’s also released its third-quarter numbers Thursday, and it said revenue at restaurants open at least 15 months was up 2.7 percent, the sixth straight quarter that figure has grown.)

Taco Bell, owned by Yum Brands Inc., is also experiencing growth with the help of new offerings such as it Doritos Locos Tacos and higher-end Cantina Bell bowls and burritos.

Additionally, diners are increasingly flocking to restaurants such as Chipotle Mexican Grill Inc. and Panera Bread Co. The broader fast-food landscape has been undergoing changes over the last several years too, with the rise of chains such as Subway and Starbucks.

On Thursday, McDonald’s said it would remain focused on value.

In the United States, for example, the company is refocusing on the Dollar Menu, which was introduced about a decade ago. The move comes after the Extra Value Menu, with slightly higher prices, fell flat.

The Extra Value Menu was intended to give McDonald’s greater pricing flexibility, rather than being boxed in by the $1 price. With the Dollar Menu, the company has swapped out many items over the years as ingredients costs have climbed. When the Dollar Menu was first introduced, for example, the flagship offering was the Big ’N’ Tasty, made with a quarter-pound beef patty. But earlier this year, McDonald's even took its small fries off the Dollar Menu.

Andy Barish, a Jefferies analyst, noted that the disappointing results were despite a Monopoly promotion and the launch of its cheddar bacon onion sandwiches. He also said McDonald’s could face a tough fourth quarter given the challenging economic climate — even with the reappearance of its popular McRib sandwich this month.

McDonald’s said that in Europe, where it gets 40 percent of its business, it would offer new meal combinations at various price ranges amid ongoing economic uncertainty and would continue remodeling restaurants.

McDonald's shares closed $1.73 lower Thursday at $85.13. Wendy’s shares were up 13 cents to $4.39.