McDonald’s reports 30% slump in quarterly profit

McDonald’s - which has not given investors many reasons to sing the fast-food chain’s “I’m lovin’ it” jingle - today said quarterly profit dropped by nearly one-third and warned that global restaurant sales will fall again in October.

Stock in the company, which attracted fewer customers during the third quarter, was off 0.6 per cent at $91.05 in early trading.

McDonald’s net income slid 30 per cent to $1.07 billion, or $1.09 per share, for the quarter ended September 30th.

Sales at restaurants open at least 13 months, a closely watched gauge of performance, fell a steeper-than-expected 3.3 per cent in the United States, where resurgent fast-food rivals and more upscale brands like Chipotle Mexican Grill are taking a bite out of market share.

Europe, which just edges out the United States as McDonald's top revenue market, is grappling with political and economic issues as McDonald's Asia works through the upheaval from a scandal involving a major supplier in China.

Chief executive Don Thompson said in a statement that the company is taking steps to revive McDonald’s global business. For example, in the United States, where McDonald’s relatively inexpensive burgers and fries are falling out of favor, the company is directly addressing rumours about its food quality.

Last week, McDonald’s launched a social media campaign called “Our food. Your questions.” The company invited consumers to ask anything about its food and got the conversation rolling with questions such as: “Is ‘pink slime’ in a Chicken McNugget?” “Why doesn’t your food rot?” “Are there worms in your beef?”

The campaign, coupled with McDonald’s recent Monopoly promotion, appeared to give the company short-term lifts in quality perception and purchase consideration from the younger, sought-after Millennial demographic that favors the likes of Chipotle, according to survey data from YouGov BrandIndex.

Nevertheless, the company’s key demographic of frequent fast-food eaters were largely unmoved by the campaigns, YouGov spokesman Drew Kerr told Reuters. The reaction from moms was more complicated, Kerr said. While the Monopoly campaign persuaded them to consider a visit to the Golden Arches, quality perception declined.

Europe’s sales at established restaurants fell 1.4 per cent in the third quarter, hurt by economic weakness in Germany as well as political events in Ukraine and Russia, formerly a fast-growing market for McDonald’s.

Same-restaurant sales at McDonald’s Asia-Pacific, Middle East and Africa business tumbled 9.9 per cent, as the China supplier scandal pummeled sales around the region, including Japan.

Reuters