McDonald’s Corporation (MCD) Contends with Steep Sales Decline

McDonald’s Corporation (NYSE:MCD), the world’s largest fast food chain, announced on Monday that it is grappling with the worst decline in its global sales, way much lower than expected, and accordingly warned the decline will substantially hit fourth quarter margins. The company cited a health scare in China as among the factors that adversely affected quarterly profits.

U.S. same store sales for the month have the steepest decline for a period of 14 years, and is also the largest drop in all divisions, recording a figure of 4.6 percent drop compared to the same month the previous year, and significantly more than the 4.1 percent drop reported for September. Analyst have expected only a 1.9 percent drop in sales for the period. A 2 percent decline was reported for same store sales in Europe. Same store sales declined 4 percent in the Africa, Asia/Pacific, and Middle East regions.

McDonald's (MCD) (640x79)

Stiff competition is seen as one major factor for the sales decline.  McDonald’s Corporation (NYSE:MCD) have been contending with competition from other fast food chains such as Burger King Worldwide Inc (NYSE:BKW) and Wendys Co (NASDAQ:WEN). Competitors using fresh ingredients in their menus are also a figure to battle with, such as  Chipotle Mexican Grill, Inc. (NYSE:CMG) and Subway. On the other hand, the company is still finding ways to lure back Chinese and Japanese customers after a scandal that revealed its suppliers tampering with meat expiration dates. In Russia, political uncertainties have adversely affected its business. Competition and other factors aside, McDonald’s Corporation (NYSE:MCD) is also shaking from the loss of its lead as a low priced fast food restaurant.

McDonald’s Corporation (NYSE:MCD)’s U.S. sales recorded 7 consecutive months of significant declines, the worst in the company’s history since 2001. Re-organization is in the works to boost U.S. sales, with company CEO Don Thompson noting that modern consumers “increasingly demand more choice, convenience, and value”.

This article has been written by Nonito Guntan.

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