McDonald's November Sales Fall More Than Expected -- 2nd Update

By Chelsey Dulaney 

McDonald's Corp. posted sharper-than-expected sales declines at all of its divisions in November, as the fast-food giant struggles to combat competition and a host of issues across its business.

Global sales fell 2.2% in November, excluding newly opened stores, while analysts had expected a 1.7% decline, according to Consensus Metrix. November's drop-off followed a smaller-than-expected 0.5% slide in October.

McDonald's also said it expects a summer meat-supplier issue in China and currency fluctuations to bring down its fourth-quarter results.

McDonald's sharpest sales decline in November came at its U.S. division, where sales fell 4.6% last month, far worse than the 1.9% drop in sales analysts had projected. That topped September's 4.1% sales slide in what was then the company's biggest monthly drop since early 2003.

Shares fell nearly 3% premarket.

An increasingly complicated menu has slowed service in the U.S. as McDonald's once-reliable base of younger customers have also defected to fast-casual chains boasting customized ordering and fresh ingredients, including Chipotle Mexican Grill Inc., and specialty-burger chains such as Five Guys.

McDonald's has said it is planning "fundamental changes to its business" to combat its recent weak performance, seeking to eliminate layers of management and creating a new organizational structure in the U.S. as it works to better respond to consumer tastes.

The company added it is working to enhance its marketing and simplify its menu to restore momentum in the division.

In the company's Asia/Pacific, Middle East and Africa region, sales at existing locations fell 4%, missing the 3.8% drop analysts were expecting. McDonald's performance in the region appears to be improving somewhat after one of its meat suppliers was accused of intentionally selling expired meat to restaurants in July. The scandal shook consumer confidence and has driven down sales in recent months.

November's decline was a slight improvement over October's 4.2% sales decline in the region.

In Europe, broader economic softness has been compounded by political complications in Russia, where authorities have been inspecting and shutting McDonald's restaurants--moves widely seen as retaliation for U.S. sanctions in response to Russia's military incursion in Ukraine.

Sales fell 2% in the division in November as "very weak results" in Russia offset strength in the U.K.. Analysts had projected a 1.9% decline in the region.

McDonald's projected the supplier issue in China would dent its fourth-quarter earnings by seven to 10 cent a shares, while the strengthening of the U.S. dollar against foreign currencies is expected to bring down results by seven to nine cents a share.

Analysts polled by Thomson Reuters recently expected per-share earnings to fall 9% to $1.27 a share. Revenue, meanwhile, is expected to fall 3% to $6.85 billion.

Write to Chelsey Dulaney at [e-mail]

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