What's going wrong at McDonald's?
The company disappointed investors in all 3 of its geographic regions in July, turning out its worst performance in 9 years.
But something has changed. The company just had its worst performance in more than nine years. Sales fell across the board in July, and the numbers were below the expectations of analysts and even the company itself.
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Same-store sales -- a key indicator of performance because it measures sales at established restaurants -- came in flat. Only two weeks ago, McDonald's said it expected those sales to rise, Reuters reported. Analysts were expecting a 2.3% increase.
Shares fell 1.7% to close Wednesday at $87.53. Shares are down 11.5% this year, and one of the basic tenets of investing -- that McDonald's is a solid, dependable industry leader -- is now being questioned.
"We've grown used to seeing McDonald's weather bad economies, so this is a bit of a surprise," RBC Capital analyst Larry Miller told Reuters.
Another analyst, Sara Senatore of Bernstein, says, "McDonald's may be underperforming the industry, which is not typical for them," she said, according to The Associated Press.
Why is McDonald's suffering? Here are several reasons, according to AP and Reuters:
1. Intense competition. Just look at Burger King (BKW), which has David Beckham as a star endorser and has also begun offering fruit smoothies and salads. Then there's the breakout Doritos Locos Taco from Taco Bell, owned by Yum Brands (YUM). Wendy's (WEN) has also been improving its advertising and its lineup.
2. Last July was good. McDonald's debuted the mango pineapple smoothie a year ago, which was great for business. It's harder to compete this year.
3. Problems in Europe. This comes as no surprise, but analysts still expected the company to see a 2.4% sales increase in Europe as the troubled economy led consumers to trade down to fast food. Instead, McDonald's said its July sales in Europe fell 0.6%.
4. Flooding in China. McDonald's also disappointed in the Asia, Middle East and Africa regions, reporting a drop of 1.5% in same-store sales. Analysts expected to see a 1.4% gain. Extreme flooding in China was partly to blame, as was a change in the timing of Ramadan and continued problems in Japan.
5. Disappointing response to McBites. McDonald's stopped promoting its chicken McBites as heavily in the U.S., and sales of the new item tumbled more than expected as a result.
6. Calendar shift. This year, there was one less Friday and Saturday in July. That makes a difference.
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High prices...plain and simple.
You can get a better quality meal at an all-you-can-eat buffet for as much as you can for a "value" meal at Mickey D's. Talk about a piss-poor value.
If people took the time to make their own egg mcmuffins at home they'd never eat there again. I only go because of the happy meals for our granddaughter. Mcbite's? Seriously, they are smaller chicken nuggets.
People are right. You either get a hot burger & cold fries or hot fries & a cold burger. No thanks! I'll go to Five Guys & pay a little more for a DAMN good burger cooked fresh w/fresh fries every time!
What's McDonalds ?? How about over priced and really bad food combined with terrible customer service.
"WE'VE GOT TO INCREASE PROFITS BY A BAJILLION DOLLARS A SECOND OR IT'S THE END OF THE WORLD!!! THE SKY IS FALLING, THE SKY IS FALLING!!!"
Cryin' out loud...ALL Fortune 500 companies panic like this. It's economic hypochondria. Chill out.
The love of money is the root of all evil.
I can understand why Macdonalds is not doing well... they have raised the prices higher and higher,,and the food has become smaller and smaller... I always like going there but not any more everything is so much smaller but the prices have been made higher.
I miss the way that it was so nice to go there but not now....hopefully things will get better...
7. People have finally realized that their burgers are cold, the buns stale, and the pickles aren't from this solar system.
8. Their customers are dying of heart disease
9. Major investment in replacing the doors to be wide enough to accommodate their existing customers
10. Their main ingredient....salt....must have gone up exponentially in price
People still eat there? I just thought it was a place to stop and pee when on an out of town road trip.
People are sick of pink-slime burgers...
And I HATE the autoplay videos on this page. I dont want a video playing unless I click it.
how about how ALL of their ads are directed at blacks? i feel like i need to wear baggy clothes and a doo rag if i want to eat a bigmac
I agree with the people posting here - you can do better/cheaper fast food at home.
We have a Tim Horton's down the street and I go there instead - more reasonable, more environmentally friendly and they don't hire dumb kids who are only there for a paycheck and act like you are an inconvenience to them.
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