McDonald's is barely holding on
Comparable sales rose only 0.1% worldwide in the fourth quarter, and January doesn't look good, either.
McDonald's (MCD) barely squeaked by in the fourth quarter, reporting Wednesday that sales at stores open at least a year only rose 0.1% globally.And the company had to work very hard just to accomplish that tiny gain. It shifted the McRib launch into December from October to give holiday sales some oomph. It pressured stores to stay open on Christmas Day. It revived its Dollar Menu to eke out even more sales.
All of that work translated into just a 0.3% sales gain at U.S. restaurants open for at least a year. The rest of the world showed a loss. In Europe, the company's largest market, same-store sales were down 0.6%. In Asia, the Middle East and Africa, sales fell 1.7%.
And global operating margins fell, restaurant analyst Howard Penney told the Associated Press. When sales are up but margins are down, he said, that means "you're giving away food."
It will get worse before it gets better. Same-store sales in January will be negative, CEO Don Thompson said in a statement discussing the earnings. The company is feeling pressure on profit and sales in the near term, he said.
The big question for McDonald's in 2013 is whether it can meet long-term targets that now look extremely ambitious. The company wants overall sales growth of 3% to 5% and operating income growth of 6% to 7%. "We believe these targets remain realistic and sustainable for a company of our size and maturity," Johnson said.
OK, but a lot of things need to suddenly start going right for McDonald's to meet those numbers. The company is planning to open about 1,500 new restaurants this year and continue the ongoing overhaul and redecorating of existing locations.
Investors aren't so sure. The stock barely budged Wednesday after the earnings were released, and at midday was up less than 1% to $93.41. Shares have fallen 6.6% in the last year, but have been on a climb since November.
Investors don't want to give up on McDonald's. But after another quarter or two like this one, they may be a little more open to the idea.
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Really?!!! I only go to Mcdonalds during shamrock shakes...$$$$$ on regular menu items, Big macs as well as the filet shrunk in size as well in quality. Giving it away.... highly doubtful.
The world is changing is so is our taste for food. Haven't eaten at McD for decades BUT I worked for them when I was a teenager (1977 - 1978) and they took quality, customer service and the company very seriously. One blogger noted the bad service and at today's prices if you are laying out $$$ to take your family for burgers and fries it better not be a bad experience!
They need to revamp their menu and COOK their food. Perhaps they need to read the comments and see what people are saying.
I appreciate Burger Kings veggie burger! I get one once in a blue moon but it's still a treat nonetheless.
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