McDonald’s August Same-Store Sales Rise 3.7%

McDonald’s August Sales Trail Estimates as U.S. Growth Slows
The world’s largest restaurant chain has tried to lure diners with less-expensive food priced at $1 to $2 as rivals increase promotions and add menu items. Photographer: Emile Wamsteker/Bloomberg

McDonald’s Corp., the world’s largest restaurant chain, said sales at stores open at least 13 months rose 3.7 percent in August, driven by growth in China and Australia.

Analysts projected an increase of 3.9 percent, the average of 17 estimates compiled by Consensus Metrix. Sales in the company’s Asia Pacific, Africa and Middle East region climbed 5.7 percent last month, Oak Brook, Illinois-based McDonald’s said today in a statement. Analysts estimated a gain of about 4 percent for stores there.

Chief Executive Officer Don Thompson has tried to lure diners with value lunches and dinners in China amid a slowing economy and more competition from local brands. McDonald’s, which gets about 22 percent of its revenue from the Asia Pacific, Africa and the Middle East unit, plans to open as many as 250 stores in China this year.

“They’re working on more value right now everywhere in the world, including China,” Larry Miller, an Atlanta-based analyst at RBC Capital Markets, said in an interview. “It’s just kind of the environment we’re in.”

McDonald’s comparable-store sales increased 3 percent in the U.S. and 3.1 percent in Europe. Analysts estimated gains of 3.1 percent and about 3.3 percent, respectively, according to a survey by Consensus Metrix, which is owned by Wayne, New Jersey-based Kaul Advisory Group.

McDonald’s fell 0.1 percent to $91.20 at the close in New York. The shares have slid 9.1 percent this year.

Japan Sales

Same-store sales fell 2.5 percent in Japan last month. Comparable-store sales are an indicator of a retailer’s growth because they include only older locations.

“Strong results in Australia and China along with the positive impact from the shift in the timing of Ramadan were partially offset by ongoing weakness in Japan,” McDonald’s said in the statement.

McDonald’s rivals have stepped up marketing of lower-priced food in the U.S. as restaurants compete for customers. While the Big Mac seller has tried to lure diners with a menu priced at $1 to $2, Yum! Brands Inc.’s KFC chain recently began advertising $1.29 snack-sized chicken sandwiches.

Confidence among American consumers fell in August by the most in 10 months as households grew more pessimistic about employment and the economic outlook.

Yum, which also owns Pizza Hut and Taco Bell, is based in Louisville, Kentucky, and has about 37,900 stores worldwide.

Europe Pressure

McDonald’s also is facing pressure in Europe, where it gets about 40 percent of its revenue, as consumers cut spending amid government austerity measures there. In some European markets, McDonald’s has advertised less expensive items, such as smaller sandwiches in France, to draw budget-conscious consumers.

Economic confidence in the euro area slumped last month as leaders struggled to rein in the sovereign-debt crisis. An index of executive and consumer sentiment in the 17-nation euro area dropped in August to the lowest in three years, the European Commission in Brussels said last month.

“Positive results in the U.K., France and Russia were slightly offset by performance in Germany and certain markets in Southern Europe,” McDonald’s said in today’s statement.

The company has more than 33,700 stores globally, of which about 20 percent are company owned and operated.

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