McDonald's Same-Store Sales Miss In July

In what pundits, analysts and investors alike are reading as a warning sign for the restaurant industry, McDonald's monthly global same-store sales results were not positive for the first time in years.

One of the largest quick-service restaurant companies in the world, and one that had weathered the recession better than most, reported Wednesday that global same-store sales were flat in July, meaning no change from the same month last year. Same-store sales fell 0.1 percent in the United States, 0.6 percent in Europe and 1.5 percent in McDonald's Asia-Pacific, Middle East and Africa region.

Since 2003, U.S. monthly same-store sales for McDonald's had only seen negative territory once in 2008, twice in 2009 and once in 2010. Europe has posted a monthly same-store sale decline only twice since 2006.

"We view July as an overall reflection of a weak global macro environment," John Ivankoe, a restaurant securities analyst at J.P .Morgan, said in a research note, adding that there are "clear [same-store sales] headwinds in the U.S. with a 'lackluster' consumer environment."

For McDonald's in particular, Ivankoe said the chain should also expect "stiffer competition than at any time in recent history from resurgent Burger King and Taco Bell ... and possibly improving Wendy's."

In April, Oak Brook, Ill.-based McDonald's reported second-quarter results that included the revelation of slower sales trends, which McDonald's said was the result of a "slowing global economy [and] persistent economic headwinds."

Still, at that time, the company expected positive results in July, as did Wall Street. McDonald's miss led to a 1.7-percent stock decline on Wednesday, to a close of $87.53. The stock is hovering near its lower annual range, as it has traded between $83.61 and $102.22 during the past 52 weeks.

McDonald's said its U.S. promotions, which included the new lower-calorie menu and Olympic branding efforts, "did not offset the effects of the sluggish economy." Overseas, the company said Germany and Japan were the weakest pockets.

"Our leadership team has the experience to effectively manage through the challenging environment and build sales and market share," McDonald's chief executive Don Thompson said in a statement.

McDonald's market share has some analysts talking, as competitors have been setting their sights on the quick-service leader for some time and are now gaining some traction.

Larry Miller, securities analyst at RBC Capital markets said U.S. sales slowed at McDonald's at the same time competitors were focused on value and new menu items. Burger King has been promoting its BBQ menu this summer following a broad menu makeover this spring, and Taco Bell has gained traction with its Doritos Locos tacos. Wendy's continues to explore new menu moves after posting a 3-percent increase in second-quarter same-store sales.

"The result was the competitive set took some share from McDonald's," Miller said.

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