McDonald's US sales disappoint amid turnaround efforts

NEW YORK, N.Y. – McDonald’s is again looking for ways to win back customers, less than a year after launching a widely touted all-day breakfast menu that makes Egg McMuffins available around the clock.

The world’s biggest burger chain reported Tuesday that sales rose a disappointing 1.8 per cent at established U.S. locations for the three months ended June 30. That’s even with the benefits from all-day breakfast, which began in October.

That rollout has been the most notable move so far under CEO Steve Easterbrook, who is fighting to turn around two years of declining customer visits. McDonald’s has called the launch a success and said it plans to expand the offerings on the menu this fall.

Easterbrook promised “even more news” soon related to the tweaks McDonald’s has been making to improve the image of its food.

That push is intended to confront one of McDonald’s most fundamental problems: the perception that its burgers and fries are processed junk food. Already, the company has made changes including switching to butter from margarine for its Egg McMuffins, and testing Chicken McNuggets made without artificial preservatives.

At its restaurants, McDonald’s is also trying to increase speed and cut down on wrong orders — one of the biggest reasons for unhappy customers. Easterbrook cited the potential of self-order kiosks and the McDonald’s mobile app to take out “many of those human interactions where complications can arise.”

In the meantime, McDonald’s still appears to be struggling to attract more customers. It said the sales bump in the most recent quarter reflected a 3 per cent price increase, and people on average ordering items that tend to cost more.

Still, McDonald’s noted that it was the fourth straight quarter in which comparable-store sales rose in the U.S., despite “softening industry growth.”

Last week, Dunkin’ Donuts said its customer traffic slipped, and Starbucks said traffic was flat from a year ago. Starbucks said its results were pressured by weakening consumer confidence and political uncertainty, a sentiment echoed by McDonald’s.

Jefferies analyst Andy Barish said he believes an increase in competition will keep pressuring sales growth in the restaurant industry. He wrote in a note to investors that people’s options for eating out or dining in “have increased tremendously,” particularly with the emergence of smaller chains and independent concepts.

Chains are also pushing more deals to attract customers amid the intensifying competition. Wendy’s has been promoting a “4 for $4” deal, while Burger King recently said it would start a promotion for $1 hot dogs.

To boost results, McDonald’s has been closing underperforming stores. It ended last year with fewer stores in the U.S., its first contraction after decades of expansion. It is on track to shrink its domestic store base of more than 14,000 again this year.

Globally, McDonald’s said sales rose 3.1 per cent at established locations. That included a 2.6 per cent increase in the division that includes established markets like the United Kingdom, Canada and Australia. The high-growth segment, which includes China and Russia, saw a 1.6 per cent increase.

For the quarter, McDonald’s earned $1.09 billion, or $1.25 per share, including a 20-cent negative impact from restructuring charges. Analysts expected $1.39 per share, not including one-time items.

Total sales were $6.27 billion, in line with Wall Street forecasts, according to FactSet.


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