McDonald’s U.S. Same-Store Sales Fall for Third Month
McDonald’s Corp. (MCD), the world’s largest restaurant chain, said sales at its established U.S. stores fell for the third straight month as severe weather and waning consumer confidence kept diners at home.
Sales at stores open at least 13 months slid 3.3 percent last month in the U.S., Oak Brook, Illinois-based McDonald’s said in a statement today. Analysts estimated a 1.6 percent drop. The January decline follows drops of 3.8 percent in December and 0.8 percent in November.
The Big Mac seller, which has about 14,100 domestic locations, has recently struggled to attract Americans amid fierce restaurant competition and declining consumer sentiment. Last month, McDonald’s posted fourth-quarter profit that was little changed from a year earlier, and Chief Executive Officer Don Thompson said the company was focused on improving U.S. results.
“Consumers are trying to pay down Christmas credit card bills and there’s just more cautiousness for the U.S. consumer,” Jack Russo, a St. Louis-based analyst at Edward Jones & Co., said in an interview. “That primary customer of theirs, which is the mid to low-end consumer, has been extra cautious.”
Russo, who recommends buying the shares, said the weather last month was unusually harsh and likely kept diners from venturing out for fast food.
The shares slipped 1.1 percent to $94.86 at the close in New York. McDonald’s has dropped 2.2 percent this year, while the Standard & Poor’s 500 Restaurants Index has decreased 3 percent.
McDonald’s global same-store sales rose 1.2 percent as the overseas business improved. Analysts estimated a 0.7 percent increase, the average of 16 projections from Consensus Metrix. Same-store sales gained 2 percent in Europe and 5.4 percent in the company’s Asia Pacific, Middle East and Africa region in January. Analysts estimated gains of 1.3 percent and 2 percent, respectively.
McDonald’s, which gets about two-thirds of its revenue from outside the U.S., has been expanding overseas and attracting European consumers with less-expensive snacks in France and new drinks in the U.K. This year, the fast-food chain plans to spend about $1.5 billion to open as many as 1,600 new locations, including 320 in Europe and 300 in China.
On Feb. 8, McDonald’s opened its first store in Vietnam. McDonald’s also is looking at potential new markets in Africa, which is expected to be a part of the company’s future growth strategy, Thompson said during an interview in Ho Chi Minh City today.
In the U.S., other fast-food chains are introducing new foods and discount fare. Burger King Worldwide Inc. (BKW) is advertising a two-sandwiches-for-$5 deal, while Wendy’s Co. is selling a new ciabatta bacon cheeseburger with garlic aioli sauce. U.S. consumer confidence unexpectedly dropped in January, signaling spending may take time to accelerate this year. The Thomson Reuters/University of Michigan index of sentiment fell to 81.2 from 82.5 in December.
McDonald’s has said it will try to draw Americans with breakfast foods and new McCafe drinks. It’s also planning to sell packaged coffee in grocery stores this year in a partnership with Kraft Foods Group Inc.
January sales fell “amid broad-based challenges including severe winter weather” in the U.S., McDonald’s said in today’s statement.
Comparable-store sales are considered an indicator of a retailer’s performance because they include only older, established locations. McDonald’s has about 35,000 restaurants worldwide and about 80 percent of those are franchised.
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