It is news to savour by those worried about obesity or with good taste. McDonald’s has gone backwards in sales for the first time in nine years.
Led by Australia, the gloss has fallen right off the world’s biggest fat — sorry — fast food dealer, McDonald’s. The burger giant’s sales growth in every region of the world slumped sharply in October, the first such fall for more than nine years.
It is news to savour by those worried about obesity or with good taste. It would seem McDonald’s sales momentum collapsed from August of this year onwards, in every one of its major regions, including Asia, where Australia is located in the corporate pecking order.
The company’s October sales report released overnight revealed comparable sales (at outlets open at least 13 months) fell 1.8% last month. That was the first fall since March 2003. And we are talking about a substantial fall because sales rose 5.5% in October of last year, were up 7% in February of this year and were still growing by a solid 3.7% in August.
McDonald’s said that sales in its big Asia/Pacific, Middle East and Africa businesses fell 2.4% “with negative results in Japan, Australia and other markets, including China”:
“US comparable sales decreased 2.2%. Modest consumer demand and heightened competitive activity offset the impact of local Dollar Menu advertising, the Monopoly promotion, and the recent launch of the Cheddar Bacon Onion premium sandwiches. Moving forward, the US remains focused on enhancing its value leadership position by balancing strong everyday value messaging with affordable premium menu options.
“In Europe, comparable sales declined 2.2% as positive results in the UK were offset by declines across many markets.”
The extent and speed of the slowdown in the past three months can be seen from what McDonald’s said in its August sales report: comparable global sales were not only up 3.7%, but sales in the US rose 3.0%, Europe was up 3.1% and in Asia/Pacific, Middle East and Africa (APMEA), comparable sales rose 5.7%. The company said the performance in Asia was partly due to “strong results in Australia and China”. Now both markets are falling.
Sales growth started slowing in September, but was still positive for the third quarter, but directors warned said the actual quarterly figure was the smallest for nine years, and they further commented that ”October’s global comparable sales are currently trending negative”. That’s the way they ended up, without any real explanation.
It can’t be blamed on weak demand from cautious consumers. McDonald’s was the eatery of choice, especially at breakfast for millions of Americans in the depths of the GFC as they lost their jobs, houses and ran low on funds or were living on food stamps. In Australia, many retailers have blamed consumer caution for weak sales growth or none at all. But seeing demand slumped sharply in October, it is hard to pin the fall on hesitant consumers. Up until then Australian growth was mostly solid, with isolated flat periods.
In the US, analysts reckon it’s the “challenging economy” (ignoring the fact that the US economy is much stronger than it was in 2008-10 and unemployment is improving and jobs growth is positive). There’s also “increased” competition from other fat, sorry, fast food dealers in Taco Bell, KFC, Burger King and Wendy’s.
Wendy’s reported a 2.7% rise in its quarterly comparable sales last week. But other analysts point to the rise of chains such as such as Chipotle Mexican Grill, Panera Bread, Subway and Starbucks which are offering widening selection of better-quality food at a slightly higher prices, something McDonald’s has attempted to do with wraps and salads, but failed to convince its customers to buy them.