McDonald’s sales slump serves up challenges for new CEO
Fast- food giant scrambles to revamp menu as competition heats up
Steve Easterbrook, the man charged with pulling McDonald’s Corp. out of its worst sales slump in more than a decade, is now seeing what he’s up against.
As Easterbrook started his second week as chief executive Monday, McDonald’s reported its ninth straight month of shrinking samestore sales. The numbers were particularly bleak in the U. S., where the fast- food chain saw a four per cent decline.
The weak performance suggests the new CEO won’t get much of a honeymoon as he works on a come- back plan, said Will Slabaugh, an analyst at Stephens Inc. in Little Rock, Arkansas. The company is scrambling to revamp its menu and operations after an exodus of customers to fast- casual chains like Chipotle Mexican Grill Inc. and Panera Bread Co.
“This likely ups the urgency in terms of this new management team putting a plan out there to turn around the business,” Slabaugh said. “We’re seeing that these negative results are continuing and investors need to see a viable alternative.”
In Easterbrook’s first week on the job, McDonald’s announced plans to stop serving chicken raised with some antibiotics in its U. S. restaurants. McDonald’s also had posted modest sales gain in the U. S. the previous two months, raising hopes that a recovery was underway. Instead, sales came crashing back down in February.
Though the results were worse than analysts had estimated, the stock rose on Monday — a sign investors are counting on Easterbrook to reinvigorate the company. McDonald’s climbed 58 cents to close at $ 97.71 US in New York. McDonald’s had gained 3.7 per cent this year through the end of last week.
In addition to suffering a slump in the U. S., McDonald’s continues to struggle in Asia. Samestore sales, which track locations open at least 13 months, dropped 4.4 per cent in the region last month. That followed a decrease of al- most 13 per cent during January, when results were dragged down by a health scare and supply problems.
The company has been dealt a series of setbacks in Asia, including the rationing of french fries in Japan and a scandal involving a meat supplier. The vendor, Shanghai Husi Food Co., was accused of repackaging old meat in July, prompting McDonald’s to take products off its menus in the region.
The woes have taken a heavy toll in Japan, where McDonald’s lost $ 186 million in 2014. The company’s sales plunged 29 per cent in that country during February.
U. S. sales, meanwhile, had been showing signs of a rebound. They climbed 0.4 per cent in January and posted a similar gain in December. That followed a streak of 13 straight months without growth in its home market.
Though analysts had been bracing for a decline in February, they didn’t expect it to be so steep. They’d estimated a decrease of 0.7 per cent, according to Consensus Metrix.
McDonald’s is retooling its U. S. operations in a bid to speed up service and draw customers back to its roughly 14,000 domestic restaurants.