Bloomberg News

McDonald’s July Sales Trail Analysts’ Estimates

August 08, 2012

McDonald’s July Store Sales Trail Estimates as U.S. Demand Drops

McDonald’s U.S. sales decline was the worst performance since January 2010 as Americans pulled back spending amid flagging consumer confidence. Photographer: Tim Rue/Bloomberg

McDonald’s Corp. (MCD:US), the world’s largest restaurant chain, said sales at stores open at least 13 months were unchanged worldwide in July as competitors wooed away some customers and the weak U.S. economy weighed on consumers.

Analysts projected an increase of 2.3 percent, the average of 14 estimates compiled by researcher Consensus Metrix. Sales at domestic locations fell 0.1 percent, Oak Brook, Illinois- based McDonald’s said today in a statement. Analysts estimated a gain of 2.2 percent for the U.S.

McDonald’s has tried to lure customers with a menu of items priced at $1 to $2 in the U.S. as rivals including Yum! Brands Inc. (YUM:US)’s Taco Bell and Wendy’s Co. (WEN:US) increase promotions and add menu items. McDonald’s U.S. sales decline was the weakest performance since January 2010, worsened by Americans pulling back spending amid flagging consumer confidence.

“A lot of their competitors have stepped up their game,” Sara Senatore, a New York-based analyst at Sanford C. Bernstein & Co., said in an interview.

McDonald’s fell 1.7 percent to $87.53 at the close in New York. The shares (MCD:US) have slumped 13 percent this year.

Sales and promotions failed to make up for the effects of the “sluggish” economy in the U.S., the company said in the statement.

Consumer Confidence

Other restaurant operators, such as Starbucks Corp. (SBUX:US) and Chipotle Mexican Grill Inc. (CMG:US) have reported that U.S. sales growth has started to slow. Confidence among American consumers fell in July to the lowest level this year as the labor market and economy showed few signs of improving.

Eateries are also facing higher costs for raw ingredients such as beef and dairy. Food prices may rise as much as 4 percent in 2013, the Department of Agriculture forecast last month.

McDonald’s said sales declined 0.6 percent in Europe and fell 1.5 percent in its Asia-Pacific, Middle East and Africa region. Analysts projected growth of 2.4 percent and 1.4 percent, respectively, according to a survey by Consensus Metrix, which is owned by Wayne, New Jersey-based Kaul Advisory Group.

Same-store sales rose in Latin American and Canada, bringing the global results “essentially to flat,” Lisa McComb, a company spokeswoman, said in an interview. The company doesn’t provide same-store sales figures for those regions.

In Japan, same-store sales slipped 4.1 percent in July. Comparable-store sales are considered a key indicator of a retailer’s growth because they include only older locations.

European Declines

In Europe, McDonald’s has advertised value items to draw customers amid government austerity measures there. The Big Mac seller has said it will increase its media spending in France, where it has more than 1,200 stores and has recently promoted less-expensive sandwiches.

Restaurants in Germany and some Southern European markets had weaker results in July amid an “increasingly difficult” economic environment, McDonald’s said in the statement.

The company also is sponsoring the Olympic Games in London this year and has said it will continue its sponsorship through 2020.

McDonald’s has about 33,700 stores globally, of which about 19 percent are company owned and operated.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $93.22 USD
    • -0.45
    • -0.48%
  • YUM
    (Yum! Brands Inc)
    • $71.17 USD
    • -0.57
    • -0.8%
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