McDonald’s January Store Sales Drop in Asia U.S Gains
McDonald’s Corp., the world’s largest restaurant chain, posted a surprise gain in U.S. same-store sales last month while demand slumped in the Asia Pacific region.
Sales in the U.S. increased 0.9 percent in January, the Oak Brook, Illinois-based company said today in a statement. Analysts projected a drop of 0.3 percent, the average of 14 estimates compiled by Consensus Metrix. Sales in Asia Pacific, the Middle East and Africa plunged 9.5 percent while analysts anticipated a decline of 5.8 percent.
The Big Mac seller has been promoting value items and breakfast foods to lure customers in Asia as Japan works to emerge from its third recession in five years and consumer confidence stagnates in China. In the U.S., McDonald’s is promoting its Dollar Menu and testing new items, such as chicken wings, to boost sales.
McDonald’s rose 0.3 percent to $94.87 at the close in New York. The shares dropped 12 percent last year, the worst annual performance in a decade. The Standard & Poor’s 500 Index advanced 13 percent in 2012.
McDonald’s January same-store sales in Japan, the company’s largest Asian market with about 3,200 locations, dropped 17 percent.
In Japan, “they’re just in a really tough position -- it’s a very competitive market,” said Sara Senatore, a New York- based analyst at Sanford C. Bernstein & Co., who rates the shares market perform, meaning the stock will perform in line with the S&P 500 Index in the next six to 12 months.
Global sales fell 1.9 percent, the first monthly sales decline for January since 2003. Analysts anticipated a drop of 1.1 percent. Sales dropped 2.1 percent in Europe while analysts had forecast a gain of 0.1 percent, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group.
In Japan, the world’s third-largest economy, retail sales rose less than forecast in December, indicating that consumer demand remains weak. Prime Minister Shinzo Abe is trying to defeat deflation and lead the Asian nation out of recession.
McDonald’s has been closing stores in Japan as comparable- store sales have fallen for 10 straight months. It has reduced the number of locations to 3,200 from more than 3,800 at the end of 2006. McDonald’s has been getting away from couponing and discounting, which affected January sales.
In China, McDonald’s January sales were hurt by “consumer sensitivity” around the chicken industry, according to the statement. Yum! Brands Inc., which owns KFC, said its China same-store sales tumbled in the fourth quarter after a former poultry supplier was investigated for selling chicken with high levels of antibiotics.
In the U.S., fast-food eateries are vying for budget- conscious customers who are seeing smaller paychecks. Yum’s Taco Bell is selling new items including loaded grillers and a Cantina Bell steak burrito, while Burger King Worldwide Inc. has recently introduced a molten fudge sundae and new chicken nuggets.
“People’s paychecks have shrunk because of the payroll tax,” Bryan Elliott, an analyst at St. Petersburg, Florida- based Raymond James Financial Inc., said in an interview yesterday. Elliott rates McDonald’s shares market perform.
“I expect that to have a measurable impact on restaurant demand this year,” he said.
Comparable, or same-store, sales are considered an indicator of a company’s growth because they include only older restaurants. McDonald’s December comparable-store sales were unchanged globally.
There are more than 34,000 McDonald’s locations worldwide and about 80 percent are franchised.
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