As global economic bellwethers go, McDonald’s sales results probably rank right up there with oil prices and consumer-confidence measures. So its shareholders, analysts and executives aren’t exactly lovin’ it when the company reports lackluster results, as it did for the third quarter.
The fast-food leader reported weaker-than-expected earnings for the period as it battled a weak global economy and accommodated more budget-minded consumers from Europe to China. Both sales and profits fell during the quarter, a rarity for McDonald’s.
Of course, McDonald’s results aren’t directly synonymous with the status of the world’s appetite for quick fare. The stronger dollar hurt international sales too. Also, competitors in many markets have been upping their game lately, including both Burger King and Wendy’s in the United States, and the new strains from rivals also are reflected in McDonald’s results.[more]
Still, McDonald’s management remained optimistic, as they are still very much in the midst of an improvement strategy that includes redesign of many restaurants worldwide, broadening of their better-for-you menus, increased frequency of popular limited-time menu options, and other steps.
“While our sales momentum and current financial results reflect today’s challenging conditions, we continue to see significant long-term opportunities for brand McDonald’s and remain confident in the underlying strength of our business model,” said McDonald’s CEO Don Thompson stated in the third quarter press release. “We have the right plans in place to drive long-term profitable growth along with the experience and alignment throughout the McDonald’s System to navigate the current environment. We expect near-term top- and bottom-line growth to remain pressured as we focus on driving guest traffic and market share by leveraging our strategies and competitive advantages in response to the global economic, operating and competitive challenges. As we begin fourth quarter, October’s global comparable sales are currently trending negative.”
Thompson highlighted momentum in Australia (with its Loose Change menu that was introduced in May with an augmented reality campaign, above), France and Japan on the earnings call before commenting that its US franchises are:
“going back to some of their Dollar Menu, specifically Dollar Menu merchandising and advertising, that’s one of the things that has to take place by making sure that the operators are all aligned, which they are now and if we get a chance to go out and do the appropriate things to our creative media. So you begun to see some of these things already, but in the U.S., it’s still going to take some time relative to them really establishing and reestablishing the strength of some of those value offerings. The bigger piece in the U.S. is what we talked about with the implementation of new sandwiches and new food.
So this Cheddar Bacon Onion [sandwich] we are pretty excited about, that product is now in the marketplace. It will be followed by McRib. We’ve seen that, McRib is the favorite and then as we go into next year, I have already seen now some of the products that will be implemented next year, and so I feel pretty good about where they are going in the first part of the year. Having said that, Pete mentioned, the first quarter of next year keep in mind, we are up against a 7.5% I think it is comp, and so it’s going to be a tougher quarter. We had some benefits from the leap year benefit and also some weather benefit. So, we know that that’s still going to be a tough quarter, but some of these things already taking route.”
The immediate response by most securities analysts was to go along with Thompson’s sentiment and maintain their “buy” ratings on the stock. They figure most of McDonald’s customers also will continue their “buy” assessment of the brand.
Two recent McDonald’s TV spots (one UK, one US) that highlight how McDonald’s starts the day: