McDonald’s Corp. reported Friday its worst monthly same-store sales results in more than 10 years as it continues to be hammered by supplier woes in China and consumer malaise at home.
Global same-store sales fell 2.5 percent in July for the Oak Brook, Ill.-based quick-service chain. Its system of more than 14,000 restaurants in the United States saw same-store sales drop by 3.2 percent, while European operations saw comps rise 0.5 percent. Monthly same-store sales in Asia/Pacific, the Middle East and Africa decreased a combined 7.3 percent in July, compared with the same month last year.
Following the announcement of the results, financial analyst Janney reduced its full-year estimate for McDonald’s worldwide same-store sales by 600 basis points, to -0.3 percent, which would make it the first year of declining same-store sales for the chain since 2002.
The poor performance occurred during the company’s global sponsorship of the World Cup.
McDonald’s said the region affected by food quality and safety issues at Chinese supplier Shanghai Husi Food Co. Ltd., including China, Japan, “and certain other markets” accounted for 10 percent of global systemwide sales.
Chinese authorities shut down the supplier after a state television exposé showed Husi workers picking up meat from a factory floor and mixing expired meat with fresher meat.
McDonald’s and other restaurant companies, including Yum! Brands Inc., have since dropped Husi as a supplier. However many of McDonald’s more than 2,000 locations in China were unable to find alternative suppliers and could not sell burgers and Chicken McNuggets. The company said Monday it hoped to resume sales of those items within a week.
An analyst note from PiperJaffray said China locations expected to offer their full menus in mid-September.
“Going forward, McDonald’s is undertaking recovery strategies to restore customers’ trust and confidence,” McDonald’s said in a release announcing the monthly performance.
July same-store sales at McDonald’s more than 14,000 United States locations decreased 3.2 percent amid continuing broad-based challenges, including operational and service challenges.
Equity analyst Andy Barish of Jefferies LLC said he was “disappointed” in the U.S. results, but noted that the chain’s annual Monopoly promotion, held in July last year, had been moved to September and October this year. He also noted that McDonald’s was losing share to competitors Jack in the Box and Wendy’s, which recently reported strong same-store sales increases, and Burger King, which has relatively flat same-store sales.
Europe’s relatively good performance was driven by strong sales in France and the United Kingdom, which McDonald’s said was partly offset by negative performance in Germany and Russia.
“McDonald’s Europe is taking a holistic approach to building customer demand with a combination of compelling limited-time menu choices and expansion of the breakfast daypart and blended-ice beverages,” the company said.
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