Fast-food giant McDonald’s Corp. (NYSE: MCD) reported that same-store sales for October were down year-over-year, but the stock is getting a boost because the drop was not as bad as expected.
Same-store sales fell 1% year-over-year. European sales were down 0.7% and Asia/Pacific, Middle East, and Africa (APMEA) sales dropped 4.2%. Globally sales were down just 0.5% year-over-year for the month, significantly better than the 2.2% drop analysts were expecting. Total sales dropped 3.4% for the month, but they were 1.9% higher in constant currency.
McDonald’s as much as admitted that it has been slow to make the changes that customers want:
Today’s consumers increasingly prefer customizable food options, dining in a contemporary, inviting atmosphere and using more convenient ways to order and pay for their meals. At McDonald’s, we are diligently working to bring these elements of the customer experience to life through McDonald’s Experience of the Future. Although October results reflect our current business challenges, we are moving with a sense of urgency to improve the trajectory of our financial performance while taking the actions necessary to pursue the Brand’s long-term potential.
The company still has some serious work to do. It has been losing sales among millennials who prefer the slightly more upscale menu at fast casual restaurants like Chipotle Mexican Grill Inc. (NYSE: CMG). McDonald’s has had to raise prices on its dollar-menu items, and this has cut into the company’s appeal to customers who want inexpensive food.
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When McDonald’s reported third-quarter results in late October, the company warned that same-store sales would be negative in the month and that “internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter.”
The company plans to give U.S. regions more autonomy in responding to customer tastes, but poor sales in Asia related to the tainted meat supply continues to hurt sales there, and the drop in sales in Russia due to the government’s temporary closure of stores more than offsets gains in the United Kingdom.
In a flash note Monday morning from Sterne Agee, the analysts note that market share declines continue to be an issue in major markets and there is no “near-term catalyst to spur sales.” Sterne Agee concludes that while there is limited downside risk, “shares will be range bound in the near to intermediate term.”
The stock was up about 0.3% in early trading, at $95.35 in a 52-week range of $89.34 to $103.78.
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