McDonald's same-store sales reflect deflating consumer confidence

Staff Writer
McDonald’s Corp. reported softening same-store sales for the month of May

McDonald’s Corp. reported softening same-store sales for the month of May, with notable weakness in key markets like Japan, China and Germany signaling to securities analysts that global consumer confidence may be weakening.

For the month, McDonald’s global same-store sales rose 3.3 percent, comprising gains of 4.4 percent in the United States and 2.9 percent in Europe, as well as a 1.7-percent decline in its Asia/Pacific, Middle East and Africa, or APMEA, division.

Bryan Elliott of Raymond James called the results “disappointing” in a research note.

“There was a slowing of trend in all three regions for which McDonald’s reports results,” he wrote. “These results are evidence of a global consumer slowdown.”

McDonald’s president and chief operating officer Don Thompson, who will succeed Jim Skinner as chief executive July 1, warned investors in several meetings last week that the chain of more than 33,500 worldwide locations would face ebbing consumer confidence in most of its global markets in the near term.

The brand would “innovate, share and scale” new products from around the world to make its menu relevant and would continue to dial up value promotion at home and abroad, Thompson said. McDonald’s and other restaurants face consumer uncertainty in the United States, austerity measures in some major European markets, and a potential consumer spending slowdown in Asia, he noted.

McDonald’s credited products like the Blueberry Banana Nut Oatmeal and Cherry Berry Chiller frozen beverage for driving the 4.4-percent same-store sales gain in the United States.

However, Elliott of Raymond James noted, after adjusting for trading day discrepancies from a year earlier, the gain was 3.5 percent, the lowest adjusted same-store sales increase since May 2011. The rate was also lower than the adjusted same-store sales gain McDonald’s achieved in March and April, he wrote.

A same-store sales decline in Germany, usually one of McDonald’s strongest European markets, weighed down positive sales in France and relatively strong performance in the United Kingdom and Russia.

In his previous meetings with investors, Thompson said the German consumer tended to be very price-sensitive and more willing to shop around for different restaurant brands with more attractive value propositions. As such, McDonald’s would continue to tweak its value platform in Germany to retain value-conscious customers over the long term.

Value promotions planned for other European markets include the mid-tier Petite Plaisirs in France as well as the Dollar Menu-like Uno Por Uno in Spain. Italy also will get a value menu similar to Spain’s, Thompson said.

In APMEA, an 11-percent decrease in same-store sales for Japan, plus an unspecified decline in China’s same-store sales, led to the 1.7-percent fall in the region’s same-store sale for May.

Sara Senatore of Bernstein Research estimated in a research note that China’s comps fell about 2 percent in May, as the market's new value dinner offering produced a slight uptick in traffic but a significant decline in average check.

Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,500 locations in 119 countries, including more than 14,000 restaurants in the United States.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN
 

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