McDonald's no longer outperforming rivals

CANDICE CHOI
Last updated 08:00 24/01/2014

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Fewer customers are stopping in at McDonald's, even as the world's biggest hamburger chain introduces a spate of new items including Mighty Wings.

The Oak Brook, Illinois-based on Thursday reported disappointing sales for its fourth quarter, hurt by a decline in customer visits at established locations.

The drop reflects a longer-term trend, with comparable guest counts down 1.9 per cent globally and 1.6 per cent in the US for the last year, according to a regulatory filing.

In a conference call with analysts, chief executive Don Thompson cited ways the company can win back customers, including speedier service, better value offerings and raising "awareness around McDonald's as a kitchen and a restaurant" that prepares high-quality food.

"We've lost some of our customer relevance," Thompson conceded, referring to perceptions about the company in the US.

After outperforming its rivals for years, McDonald's is facing a mix of challenges, including a shift in eating habits toward foods people feel are fresher or healthier.

The company has been working to better reflect those tastes by adding options such as chicken wraps and egg whites for its breakfast sandwiches.

But without providing specifics, the company said it has seen a "muted response" to its various promotions.

McDonald's is also facing heightened competition from rivals such as Burger King and Wendy's, and all three chains have been aggressively promoting their value menus in a fight for customers.

To address concerns the strategy could eat into profit margins, McDonald's recently updated its decade-old Dollar Menu.

The "Dollar Menu & More" now includes items that cost around US$2 ($2.40) and US$5.

For the quarter, McDonald's said global sales slipped 0.1 per cent at established locations. In the US, the figure fell 1.4 per cent.

It rose 1 per cent in Europe and fell 2.4 per cent for the unit encompassing Asia, the Middle East and Africa.

The figure is a key metric because it strips out the volatility of newly opened and closed locations.

For January, McDonald's expects the figure to be flat overall. It also expects the challenges it's facing to persist in the year ahead.

McDonald's earned US$1.4 billion ($1.5 billion), or US$1.40 per share, for the three months ended December 31. That's a penny more than Wall Street expected. A year ago, it earned US$1.39 billion, or US$1.38 per share.

The opening of new locations helped lift revenue to US$7.09 billion. But that was shy of the US$7.1 billion analysts expected.

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Shares of McDonald's edged up 6 cents to US$94.94.

- AP

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