McDonald’s February US Sales Snowed in by Harsh Weather

Edited By Vani Rao

February global sales at locations open see 0.3% dip

McDonald’s Corp. (NYSE:MCD) is certainly facing the brunt of the severe weather conditions that prevailed in the US over the past few weeks. On Monday, March 10, 2014, the company stated that same-sales in the US fell 1.4% in February, while global same-store sales dipped 0.3%. The company’s officials said that its muted year-to-date global comparable sales performance could hurt its first-quarter profit margins. The dip in sales is mainly on account of the harsh wintery weather which has challenged the industry dynamics, but also, most importantly the changing customer preferences, something that the company had completely ignored.

shutterstock_133078556McDonald’s traditional strength, consistency, does not seem to be working anymore. The fast food giant has been struggling to offer customers greater variety and healthier meal offerings. Over the years, McDonald’s has been dealing with competition from rivals like Burger King (NYSE: BK-C) and Wendy’s (NASDAQ:WEN), which have value menus and special offers. To add to its woes, it is facing the heat from the likes of Chipotle Mexican Grill (NYSE:CMG) and Five Guys Burgers and Fries. These nimble fast food chains are positioning themselves as a step-up from traditional fast food in terms of quality. What is more, they also offer greater customization, allowing diners to choose the toppings they want.

New menu, wider variety in the offering

Quickly adapting to the changing consumer tastes, McDonald’s is rolling out new prep tables that can hold more toppings and sauces. In Southern California, the company is even testing a “build-your-own-burger” concept, where diners use tablets to select the bread, cheese, and other toppings they want on their burgers. While results are promising so far, launching the concept across its 14,000 plus US locations would definitely add to costs.

As part of its game plan to offer fresher, healthier food, McDonald’s has made other changes to its menu, including the option to get egg whites in breakfast sandwiches, and the addition of chicken McWraps. To boost lagging sales, McDonald’s launched a new premium menu. Hence. on March 10, 2014, it introduced the first item on the menu; a Bacon Clubhouse Sandwich. In addition, McDonald’s is introducing new McCafé Petite Pastries, a pint-sized pastry, in its breakfast and coffee menu at 112 San Diego stores as a pilot project.

McDonald’s has more than 35,000 locations in more than 100 countries, where it reported a mixed report card for February. In the Middle East, Africa, and the Asia/ Pacific region, sales declined 2.6% mostly attributed to softness in Japan and a shift in the timing of the Chinese New Year. In Europe, sales were up 0.6% on a strong performance in the UK and growth in France. This was mostly offset by continued softness in Germany.

Overall, the slump in February sales resulted in the stock shedding 17 cents to $95.33 in premarket trading on March 10, 2014.

Below is the stock movement against the S&P 500 on 11 March 2014.

Source: Bloomberg
Source: Bloomberg

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