McDonald's still struggling in the U.S.

by Monica Watrous
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In the coming months, McDonald’s plans to expand all-day breakfast to more markets.

OAK BROOK, ILL. — McDonald’s performance in the United States continues to be disappointing, but the fast-food company’s executives are hopeful a series of changes will stabilize the business. In the second quarter ended June 30, McDonald’s posted net income of $1,202.4 million, equal to $1.26 per share on the common stock, down 13% from $1,387.1 million, or $1.40 per share, in the prior-year period. Total revenues for the quarter fell 10% to $6,497.7 million from $7,181.7 million the year before.

Global comparable sales for the second quarter fell 0.7%, as traffic declined in all major segments. U.S. comparable sales fell 2% in the quarter, as featured products and promotions failed to deliver expected results.

“I believe we are making the right moves to begin to stabilize the U.S. business, but there is no silver bullet,” said Steve Easterbrook, president and chief executive officer of McDonald’s Corp., during a July 23 earnings call with financial analysts. “No one move will turn a business that has been in decline for nearly three years. And while recovery will be bumpy, I am confident we’re moving in the right direction.”

Since announcing the initial steps of a global turnaround plan in May, McDonald’s has made “meaningful progress,” Mr. Easterbrook said. In the United States, which represents more than 40% of the company’s business, McDonald’s has implemented a series of structural and operational changes, which have included reducing the number of menu items displayed on drive-thru menu boards by a third and modifying cooking methods to create hotter, juicer sandwiches.

In the coming months, McDonald’s plans to expand all-day breakfast to more markets, reduce more menu items, and launch a mobile app in the United States.

Steve Easterbrook, president and c.e.o. of McDonald’s Corp.

“The initial version of the app will make it easy for consumers to receive value when they choose McDonald’s through features like tailored offers that are easy to redeem and rewards for regular purchases of their favorite McCafe beverages,” Mr. Easterbrook said. “And at the same time, the team is already hard at work developing additional features to hasten the shift from mass communication to personal one-to-one engagement with customers in the future.”

For the first six months of the year, McDonald’s net income tumbled 22% to $2,013.9 million, or $2.09 per share, which compared with $2,591.9 million, or $2.61 per share, for the same period of fiscal 2014. Total revenues fell 10% to $12,456.6 million from $13,882 million.

The company said it expects to report positive comparable sales on a global basis in the third quarter, supported by improving trends in international markets that may offset continued weakness in the United States.

“Currently the U.S. is a little bit of a drag,” Mr. Easterbrook said. “We are looking just to narrow that gap and return that business to growth, but we are not putting in anything significant for growth at all in the third quarter. But we are working hard towards getting it by the end of the year.”
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