OAK BROOK, ILL. — Executives of McDonald’s Corp. are still looking for the special sauce to spark growth in the United States, where comparable sales declined 2.6% in the recent quarter. The fast-food chain in the past year has launched a number of initiatives to improve the business, including cutting menu items to simplify operations, adding menu items to drive demand, investing in digital technology, raising employee wages and closing underperforming restaurants. The chain has employed various marketing gimmicks, like allowing customers to pay for meals with hugs or high-fives.
More recently, McDonald’s began testing all-day breakfast and build-your-own burgers in select markets and is working to remove controversial ingredients from menu items, such as artificial colors, flavors and preservatives from grilled chicken. On May 4, the company plans to share in a conference call with the investment community initial details of yet another turnaround plan.
“With the team around me, we are challenging some of the conventional thinking on multiple fronts,” said Steve Easterbrook, president and chief executive officer, during an April 22 conference call with financial analysts. Mr. Easterbrook stepped into the role three months ago, after Don Thompson stepped down.
For the first quarter ended March 31, McDonald’s had net income of $811.5 million, or 84c per share, down 33% from $1,204.8 million, or $1.21 per share, in the prior-year period.
“This weak top-line performance accounted for about half of the constant currency decline in operating income for the first quarter,” said Kevin Ozan, executive vice-president and chief financial officer, “The other half of the decline in operating income is attributable to the $195 million of strategic charges taken in the quarter to optimize the business.”
The charges included asset write-offs related to refranchising and the closing of approximately 350 unprofitable restaurants in Japan, China and the United States.
Revenues totaled $5,958.9 million, down 11% from $6,700.3 million in the comparable quarter. Foreign currency translation negatively affected reported revenues by $700 million.
Global comparable sales decreased 2.3%, as traffic fell in all major segments.
Comparable sales in the United States declined on slipping traffic and sales. Operating income fell 11%, reflecting weak sales and the effect of restructuring and restaurant closing charges.
“We are working to enhance the customer experience with locally relevant taste, a simplified menu and compelling value offerings,” Mr. Ozan said.
In Europe, comparable sales declined 0.6%, as positive performance in the United Kingdom was more than offset by weakness in France and Russia. Operating income dropped 20%, or 4% in constant currencies, due to soft consumer sentiment and currency headwinds in Russia and ongoing macroeconomic challenges across much of Europe.
Comparable sales in the Asia Pacific, Middle East and Africa region declined more than 8% on consumer perception issues in Japan, where sales declined 32%, and negative but improving performance in China, where sales fell 4.8%. Operating income tumbled 80%, or 77% in constant currencies, as the result of strategic restaurant closings and other charges.
“Japan’s recovery from the supply issue has not been as strong as China, and subsequent consumer perception issues have further depressed sales and profitability,” Mr. Easterbrook said.
McDonald’s executives declined to provide an update on the company’s full-year financial outlook but warned of negative global comparable sales in April.Still, McDonald’s shares rose more than 3%, or $2.97, on the New York Stock Exchange from the previous day’s close of $94.87.