McDonald's same-store sales fall for first time since 2003

McDonald's same-store sales fall for first time since 2003

Global monthly same-store sales for the company decreased by 1.8 percent in October

For the first time since April 2003, global monthly same-store sales for McDonald’s Corp. fell, decreasing by 1.8 percent in October.

Same-store sales fell in both the United States and Europe by 2.2 percent, while those in the Asia/Pacific, Middle East and Africa, or APMEA, division declined by 2.4 percent.

The results were not unexpected, as McDonald’s chief executive Don Thompson disclosed last month during the company’s third-quarter earnings call [3] that October sales were trending negative in all three areas of the world. The company at that time laid out a strategy to pivot its marketing back toward value platforms like the Dollar Menu in order to drive traffic and market share gains in a time of low consumer confidence and spending.

“Though October’s sales results reflect the pervasive challenges of today’s global marketplace,” Thompson said in a statement released Thursday, “I am confident that our strategies and the adjustments we are making in response to the current business headwinds will build sales momentum and drive sustained, profitable growth.”

Boosting sales over the next several months with a strategy that potentially trades average check gains for traffic growth could prove difficult, given that the brand will face tough year-earlier comparisons through March 2013. From November 2011 through March 2012, McDonald’s same-store sales grew each month more than October 2011’s 5.5-percent result. The company's lowest increase of 6.7 percent came in January 2012, and its high of 9.6 percent came in December 2011.

Last month’s results did suffer from the effect of a negative calendar shift, which David Tarantino of Robert W. Baird & Co. estimated to cause a drag of negative 2.1 percent. Excluding that shift, global same-store sales would have increased 0.3 percent, he wrote in a research note. He noted, however, that he was “cautiously optimistic that better trends can emerge as McDonald’s gets past a wall of challenging comparisons in upcoming months.”

“We see opportunity for better performance to emerge in 2013 as a whole,” Tarantino wrote, “with results aided by planned initiatives — including increased emphasis on value plus premium offerings across markets — fewer cost pressures and less negative currency translation.”

In the United States, the 2.2-percent same-store sales decline lapped a year-earlier gain of 5.2 percent, and the company said flagging consumer demand and heightened activity from competitors offset sales momentum from the shift toward Dollar Menu advertising and the popular Monopoly Game promotion. Late in the month, McDonald’s launched the premium limited-time offering of the Cheddar Bacon Onion sandwich.

Europe’s 2.2-percent decrease in same-store sales compared with a 4.8-percent gain in October 2011. In the third-quarter earnings call, Thompson noted that the United Kingdom and Russia remained bright spots for the division but could not overcome weak sales in other key markets like France and Germany, which are stepping up advertising for their value platforms.

APMEA reported its 2.4-percent decrease in comparison with last October’s same-store sales increase of 6.1 percent. McDonald’s disclosed that same-store sales were negative across several markets, including APMEA’s three biggest: Japan, Australia and China.

Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,500 restaurants worldwide, including more than 14,000 locations in the United States.

Contact Mark Brandau at [email protected] [7].
Follow him on Twitter: @Mark_from_NRN [8]