How McDonald's Plans to Battle Tough Market Conditions

By Frazer Jones
McDonalds Corporation has suffered some tough hits this summer – Millennials and young parents are expanding their lunch vocabularies beyond the H...

McDonald’s Corporation has suffered some tough hits this summer – Millennials and young parents are expanding their lunch vocabularies beyond the Happy Meal, and the food safety crisis in China with McDonald’s supplier hit the franchise especially hard. Now, for the second month in a row, the proof is in the numbers. This week McDonald’s announced its global comparable sales for August, and the percentages are down a total of 3.7 percent across the board.

According to the latest financial release, McDonald’s saw a 2.8 percent decrease in the United States and a more modest 0.7 percent decrease in Europe. McDonald’s Asia-Pacific, Middle East and Africa (APMEA) sector was hit hardest by far, experiencing a staggering 14.5 percent decrease in comparable sales against last year for the month of August.

“During August, McDonald's global business faced several headwinds that impacted sales performance,” said McDonald's President and Chief Executive Officer Don Thompson, who notes that the company is working hard on several initiatives to combat these losses and recoup sales in the future. In the United States, for example, McDonald’s is working on beefing up customer service and new menu items that could entice a rise in business – most notably, this week McDonald’s filed a trademark application for the term “McBrunch,” potentially signaling that McDonald’s is doubling down on its efforts to beat Taco Bell and reign supreme as the breakfast menu of choice.  

Recovery is understandably more difficult in the APMEA sector, where supplier issues in China have left consumers with a loss of trust and a lot of unease. In this case, McDonald’s is focusing less on menu development and more on recovery strategies to rebuild consumer trust. While much the damage may already be done for this year – McDonald’s acknowledges that will be adjusting its overall 2014 financial outlook in light of the related sales losses, which are predicted to affect third quarter results by as much as $0.20 per share – making the effort is still imperative toward growing, whether the results are seen in this year’s sales or next year’s.

“As a System, we are diligently working to effectively navigate the current market conditions to regain momentum,” says Thompson. “For the long term, we remain focused on strengthening the key foundational elements of our service, operations and marketing to maximize the impact of our strategic growth priorities for our customers and our business.”

 

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