McDonald’s Corp (MCD.N) on Tuesday reported declining sales at established restaurants across all regions in August, the fifth monthly drop since CEO Don Thompson took the helm in July 2012, and warned a China supplier scandal would cut into profits.
The company, which has been battling internal missteps, competition and shifting consumer tastes, said the supplier issue that crushed sales in China and Japan would reduce third-quarter profit by 15 to 20 cents per share.
Expectations were low ahead of the monthly report and shares in McDonald’s barely budged on the news, falling 0.7 percent to $91.83 in early trading.
Thompson is under mounting pressure to improve results at the world’s biggest fast-food chain by revenue.
Among other things, analysts blame bloated menus for slower service and say the company is struggling to compete with resurgent rivals such as Wendy’s Co (WEN.O) and Burger King Worldwide Inc (BKW.N) as well as privately held chains such as In-N-Out Burger and Chick-fil-A.
Janney Capital Markets analyst Mark Kalinowski on Tuesday cut his profit forecasts for McDonald’s in a note titled “That’s Not Ketchup … It’s Blood”.
Restaurant sales in the Asia/Pacific, Middle East and Africa region that includes China and Japan fell a steeper-than-expected 14.5 percent. Diners shunned the chain after a television news expose showed workers mishandling meat at a key supplier in China, and McDonald’s scrambled to find new sources for ingredients to make its Chicken McNuggets and Big Macs.
Sales at U.S. restaurants open at least 13 months were off 2.8 percent, also more than expected. Monthly same-restaurant sales for the company’s home market have been down or flat since November 2013.
European restaurant sales were down 0.7 percent, less than feared, as the company grapples with restaurant closures in Russia, which had been one of its stronger markets in the region. Russia’s food safety watchdog said it ordered the closures for sanitary reasons but they coincided with a standoff over the West’s Ukraine-related sanctions on Russia.
Global same-store sales dropped 3.7 percent in August, more than the 3.1 percent decline expected by analysts polled by research firm Consensus Metrix.
Thompson has shuffled management, most recently announcing the replacement of McDonald’s U.S. president for the second time in two years. Chief Creative Officer Marlena Peleo-Lazar, who gets credit for McDonald’s “I’m lovin’ it” tagline, is also out.
Meanwhile, analysts, investors and franchisees are pressing the company to simplify its menu, which includes everything from salads and wraps to lattes and smoothies, in a bid to broaden its audience and boost sales.