Slowing Sales at McDonald's Not a Good Sign

McDonald's released its monthly sales results today, and the news wasn't good.

McDonald's same-store sales off more than expected has the story:

"McDonald's Corp.'s  global same-store sales fell a bigger-than-expected 1.8% in October as the world's largest fast-food chain struggles to combat slowing consumer demand amid ongoing economic uncertainty. . . .

"Though October's sales results reflect the pervasive challenges of today's global marketplace, I am confident that our strategies and the adjustments we are making in response to the current business headwinds will build sales momentum and drive sustained, profitable growth," said President and Chief Executive Don Thompson.

McDonald's has been able to boost guest traffic and sales faster than most of its competitors with its expanding global operations and increasingly diverse menu, such as higher-margin products like blended-ice drinks. But austerity measures in Europe have contributed to slower global same-store sales growth in recent months. . . .

McDonald's said October systemwide sales fell 0.8%, or rose 0.6% in constant currencies.

Same-store sales in the U.S. fell 2.2%, missing the analysts' estimate of a 1.05% decline. The company said modest consumer demand and heightened competitive activity offset the benefits from its local Dollar Menu advertising, the Monopoly promotion, and the recent launch of Cheddar Bacon Onion premium sandwiches.

In Europe, same-store sales declined 2.2%--below the analysts' forecast for a 0.69% decrease--as positive results in the U.K. were offset by declines across many markets. McDonald's said it intends to reinvigorate its value offerings in Europe through increased advertising and new meal combinations at various price tiers.

The Asia/Pacific, Middle East and Africa region posted a 2.4% decrease, topping the analysts' projection for a 3.01% drop. The decrease reflects negative results in Japan, Australia and other markets, including China."

Summing Up 

When McDonald's reports declining sales, it's noteworthy.

And when it reports declining U.S. sales, it's a little disturbing.

As the value leader and the best operator in the fast food business, what happens at McDonald's says lots about the consumer and the overall economy.

We'll stay tuned as we enter the holiday season.

Thanks. Bob.