The troubling times are far from over for the largest fast-food chain of the world with McDonalds Corporation (NYSE:MCD)’s global same store sale hitting rock bottom. The fast-food chain lost 3.7% of its global sales in August, the largest decline in over 10 years.
After some potential raw material scandals and lack of supplier in China, McDonalds has witnessed a share decline in burgers and nugget sales in China. Further, McDonalds Corporation (NYSE:MCD) recorded 14.5 slide in its sales in Middle East, Asia/Pacific, and Africa. One of the biggest challenges for McDonalds is to win customer’s trust in China after one of its suppliers, Shanghai Husi Food Co, was charged with food safety issues because of expired meat. The company has already mentioned that supplier problems are likely to affect its quarterly results in China.
In addition to the declining sales, McDonalds Corporation (NYSE:MCD) has lost its share value over the last one month and the company has lost nearly 10% share value in the past three months. The company said that the supplier problem is likely to reduce its EPS by 15 to 20 cents considering the lower sales, money spent in recovery, and possible change in its quarterly tax rates.
Earlier, the company announced that it will tighten up its supplier audits to avoid any similar incidents and employ quality officers and video surveillance for the same. CEO of the company, Don Thompson, said, “We are diligently working to effectively navigate the current market conditions to regain momentum.”
With all of these problems, McDonalds Corporation (NYSE:MCD) is facing tough competition from other brands that offer healthier eating options with custom menu features including Chipotle Mexican Grill, Inc. (NYSE:CMG). An earlier statement indicated that nearly 40% of the stores operating in the U.S. are either losing business or working no profits for the last 13 months.
This article has been written by Prakash Pandey.