McDonald's Corp on Thursday reported a 1.8 percent drop in October sales at established restaurants around the world, its first monthly sales fall since March 2003, hurt by tougher competition and a soft economy. The world's largest hamburger chain last month signalled that October sales were on the decline. Resurgent rivals like Burger King Worldwide Inc, Wendy's Co and Yum Brands Inc's Taco Bell are luring US diners with revamped menus, low-priced food and catchy advertising.
McDonald's US market share losses "seem to have accelerated in recent months," Jefferies & Co analyst Andy Barish said in a note to clients. The renewed competition and weak economy are presenting challenges for new chief executive Don Thompson, who took over on July 1. Edward Jones analyst Jack Russo said October sales also were hurt because the month had one less Saturday and one less Sunday compared with October 2011. McDonald's sells more on weekends.
Russo said he expects McDonald's to respond with even more promotions in November, but he also said Superstorm Sandy, which hit the US Northeast at the end of October, was likely to weigh on November sales. Many US restaurant companies, including investor favourite Chipotle Mexican Grill, have reported cooling demand as diners get more frugal with every dollar. But there are exceptions.
Wendy's, the second-largest US hamburger chain, has gotten a boost from a turnaround effort that includes re-doing both its menu and its restaurants. On Thursday, that chain reported a 2.7 percent increase in third-quarter sales at established company-operated restaurants in the United States.
McDonald's shares were down 1 percent at $85.99 in morning trading, while stock in Wendy's was up 4.2 percent at $4.44. October sales at McDonald's restaurants open at least 13 months fell 2.2 percent in both the United States and Europe and dropped 2.4 percent in the Asia/Pacific, Middle East and Africa (APMEA) region. Analysts, on average, had expected a 1.05 percent decline in the United States, a 0.69 percent fall in Europe and a 3.01 percent drop for the APMEA region, according to Consensus Metrix. The United States just edges out Europe as McDonald's largest market for sales. The October sales results came just weeks after McDonald's posted its worst quarterly restaurant sales growth performance in nine years.
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