In the highly competitive fast-food industry, McDonald’s Corporation (NYSE:MCD) reported lower than expected drop in its sales during October 2014. The world’s largest fast-food chain is facing stiff competition from other fast food chains including Chipotle Mexican Grill, Inc. (NYSE:CMG), Wendys Co (NASDAQ:WEN) and Burger King Worldwide Inc (NYSE:BKW).
The drop in global comparable sales of McDonald’s was 0.5% in October and the respective drop in sales in the U.S., Europe, and Asia/Pacific, Middle East, and Africa was 1.0%, 0.7%, and 4.2%. This is much better than the analysts’ expectations of 2.2% global decline along with 1.9% decrease in the U.S. McDonald’s Corporation (NYSE:MCD) is facing a decline in sales because of the supplier scandal in China followed by political and economic reasons in the European market.
Don Thompson, CEO of McDonald’s, said,
“Today’s consumers increasingly prefer customizable food options, dining in a contemporary, inviting atmosphere and using more convenient ways to order and pay for their meals. At McDonald’s, we are diligently working to bring these elements of the customer experience to life through McDonald’s Experience of the Future.”
John Glass, analyst for Morgan Stanley, said that the same-store-sales metrics witnessed an improvement in the month but continued to struggle. He added,
“In the U.S., same-store-sales of -1 percent suggest a marked improvement month over month from the -4.1 percent reported in September, as the gap to Quick Service Restaurant peers improved from -6.3 percent in September to -4.8 percent in October.”
Glass further added that some of the primary reasons for this marginal improvement include Mighty Wings promo from McDonald’s Corporation (NYSE:MCD) along with its Monopoly promotion.
The sales of the fast-food chain have not improved since October 2013 primarily because of the increasing competition from chains including Chipotle Mexican Grill, Inc. (NYSE:CMG), which allow diners to pick up the ingredients for their order.
This article has been written by Prakash Pandey.