By Chelsey Dulaney
McDonald's Corp. posted sharper-than-expected sales declines at
all of its divisions in November, as the fast-food giant struggles
to combat competition and a host of issues across its business.
Global sales fell 2.2% in November, excluding newly opened
stores, while analysts had expected a 1.7% decline, according to
Consensus Metrix. November's drop-off followed a
smaller-than-expected 0.5% slide in October.
McDonald's also said it expects a summer meat-supplier issue in
China and currency fluctuations to bring down its fourth-quarter
results.
McDonald's sharpest sales decline in November came at its U.S.
division, where sales fell 4.6% last month, far worse than the 1.9%
drop in sales analysts had projected. That topped September's 4.1%
sales slide in what was then the company's biggest monthly drop
since early 2003.
Shares fell nearly 3% premarket.
An increasingly complicated menu has slowed service in the U.S.
as McDonald's once-reliable base of younger customers have also
defected to fast-casual chains boasting customized ordering and
fresh ingredients, including Chipotle Mexican Grill Inc., and
specialty-burger chains such as Five Guys.
McDonald's has said it is planning "fundamental changes to its
business" to combat its recent weak performance, seeking to
eliminate layers of management and creating a new organizational
structure in the U.S. as it works to better respond to consumer
tastes.
The company added it is working to enhance its marketing and
simplify its menu to restore momentum in the division.
In the company's Asia/Pacific, Middle East and Africa region,
sales at existing locations fell 4%, missing the 3.8% drop analysts
were expecting. McDonald's performance in the region appears to be
improving somewhat after one of its meat suppliers was accused of
intentionally selling expired meat to restaurants in July. The
scandal shook consumer confidence and has driven down sales in
recent months.
November's decline was a slight improvement over October's 4.2%
sales decline in the region.
In Europe, broader economic softness has been compounded by
political complications in Russia, where authorities have been
inspecting and shutting McDonald's restaurants--moves widely seen
as retaliation for U.S. sanctions in response to Russia's military
incursion in Ukraine.
Sales fell 2% in the division in November as "very weak results"
in Russia offset strength in the U.K.. Analysts had projected a
1.9% decline in the region.
McDonald's projected the supplier issue in China would dent its
fourth-quarter earnings by seven to 10 cent a shares, while the
strengthening of the U.S. dollar against foreign currencies is
expected to bring down results by seven to nine cents a share.
Analysts polled by Thomson Reuters recently expected per-share
earnings to fall 9% to $1.27 a share. Revenue, meanwhile, is
expected to fall 3% to $6.85 billion.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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