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McDonald's sales drop for first time since 2003

By Candice Choi

AP Food Industry Writer

POSTED:
LAST UPDATED: 02:29 p.m. HST, Nov 08, 2012


NEW YORK >> McDonald's Corp. is having a tough time stomaching the competition.

The world's biggest hamburger chain said Thursday that a key sales figure fell for the first time in nearly a decade in October, as it faced the double whammy of a challenging economy abroad and intensifying competition at home. The company, based in Oak Brook, Ill., says global revenue at restaurants open at least 13 months fell 1.8 percent for the month. The last time it dropped was in March 2003.

The figure is a key metric because it strips out the impact of newly opened and closed locations. It's a snapshot of money spent on food at both company-owned and franchised restaurants and does not reflect corporate revenue.

McDonald's says the figure fell in each of the three regions it reports. In both the U.S. and Europe, it fell 2.2 percent. In the region encompassing Asia, the Middle East and Africa, it dropped 2.4 percent. CEO Don Thompson cited the "pervasive challenges of today's global marketplace" for the declines.

Canada, which is not included in the monthly sales figures, was positive for the month.

After years of outperforming its rivals, McDonald's has been hitting some road bumps recently, with longtime rivals such as Burger King and Wendy's Co. reviving their brands with improved menus and new TV ad campaigns. Taco Bell, owned by Yum Brands Inc., is also enjoying growth with the help of new offerings such as it Doritos Locos Tacos and higher-end Cantina Bell bowls and burritos.

Additionally, people are increasingly flocking to restaurants such as Chipotle Mexican Grill Inc. and Panera Bread Co., which offer better-quality food for a little more money. The broader fast-food landscape has been undergoing changes over the past several years too, with the rise of chains such as Subway and Starbucks.

On Thursday, McDonald's said it would remain focused on underscoring its value message.

In the U.S., for example, the company is refocusing on the Dollar Menu, which was introduced about a decade ago. The move comes after an attempt to shift customers to an "Extra Value Menu," which charges slightly higher prices, fell flat.

The Extra Value Menu was intended to give McDonald's greater pricing flexibility, rather than being boxed in by the $1 price. With the Dollar Menu, the company has had to swap out many items over the years as costs for ingredients have climbed. When the Dollar Menu was first introduced, for example, the flagship offering was the Big 'N Tasty, made with a quarter-pound beef patty. But earlier this year, McDonald's even took its small fries off the Dollar Menu.

In October, McDonald's said that marketing for its Dollar Menu in the U.S. was offset by "modest consumer demand" and heightened competition. Moving forward, the company said it would continue its everyday value marketing.

Andy Barish, a Jefferies analyst, noted that the disappointing results were despite a Monopoly promotion and the launch of its Cheddar Bacon Onion sandwiches. Barish also said McDonald's could face a tough fourth quarter given the challenging economic climate — even with the periodic appearance of its popular McRib sandwich scheduled for later this month.

In Europe, where McDonald's gets 40 percent of its business, McDonald's said it would offer new meal combinations at various price ranges amid ongoing economic uncertainty, and continue remodeling restaurants. The company said positive results in the United Kingdom were offset by declines across many other regions.

In Asia, the company said it plans to differentiate itself with menu offerings tailored to local tastes.

The company noted that the results were hurt by a calendar shift, with this year's October having one less Saturday and Sunday and one more Tuesday and Wednesday. Restaurants typically rake in more sales on weekends.

McDonald's shares fell $1.73, or 2 percent, to close at $85.13 Thursday. The company, which has more than 34,000 locations worldwide, had warned last month that sales were trending negative for the month.







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Upperkula wrote:
Mcdonalds had got have better Quality control. Their fries suck, the burgers need a revamping their menu is to old. Burger King blows them away. Not that I eat fast foods, LOL
on November 8,2012 | 06:50PM
nodaddynotthebelt wrote:
The pricing scheme needs to be worked on. For one thing, why does the fish sandwich meal cost almost as much as the big burger meals? Unless the fish patties cost more than the bigger burger patties it is simply do not make sense. McDonald's needs to adjust those prices so that the customers are more apt to think that they are getting value. We all know that fast food is bad for you but some of us like to treat ourselves and our families to a burger once in a while. I think they could stand to reduce the price of the fish sandwich meal. If they do that, they may find that the people that normally do not eat out may come for the lower prices. They are not necessarily looking for cheap meals (as someone interviewed in another article mentioned). They are looking for real value. Let's face it. Fast food today is not cheap. Maybe back in the 60's it was cheap. Today, a burger meal costs about seven dollars. Factor in the fact that the soda costs the restaurant only pennies and the fries are probably one of the most highly marked up items along with soft drink in the restaurant industry. Today, I am more apt to make the burgers for my family as it costs only a fraction and I get to use quality ingredients. And in the end with the money saved my family gets to eat better more often.
on November 8,2012 | 09:30PM
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