New York: McDonald’s Corp. is having trouble 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, Illinois, says global revenue at restaurants open at least 13 months fell 1.8% 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 2.2% in both the US and Europe in October. In the region encompassing Asia, the Middle East and Africa, it dropped 2.4%. CEO Don Thompson cited the “pervasive challenges of today’s global marketplace” for the declines.
After years of outperforming its rivals, McDonald’s has seen sales slow recently, with longtime rivals such as Burger King and Wendy’s working to revive 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, 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 US, for example, the company is returning its focus 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 more flexibility with profit margins. With the Dollar Menu, the company has had to swap out many items over the years as costs for ingredients have climbed. For example, the Dollar Menu was first introduced with the flagship offering of the Big ‘N Tasty, made with a quarter-pound beef patty. Earlier this year, McDonald’s even took its small fries off the Dollar Menu.
In October, McDonald’s said that the impact of Dollar Menu advertising in the US was offset by “modest consumer demand” and heightened competition. Moving forward, the company said it would continue its everyday value marketing.
The same was true for Europe, where McDonald’s gets 40% of its business. Amid the region’s ongoing economic uncertainty, McDonald’s said it would offer new meal combinations at various price ranges and continue remodeling restaurants. The company said positive results in the United Kingdom were offset by declines across many other regions.
In the Asia, the company said it plans to differentiate itself with menu offerings tailored to local tastes.
McDonald’s shares were down 61 cents at $86.23 in premarket trading. The company, which has more than 34,000 locations worldwide, had warned last month that sales were trending negative for the month. AP