McDonald's Global Sales Slump 1.9 Percent; Price, Competition, Jobs to Blame

Most people love McDonalds, but I am in the distinct minority. Regardless, global sales are down perhaps an indication that the price people are willing to pay for convenience has at least temporarily reached a peak.

Reuters reports, McDonald's January sales drop more than anticipated

McDonald's Corp (MCD) said on Friday that January sales at established restaurants around the world fell 1.9 percent, a steeper decline than expected as fast-food chains fight for diners.

McDonald's warned last month that same-restaurant sales would be down. Analysts polled by Consensus Metrix had expected a decline of 1.1 percent.

Comparable sales in Europe, McDonald's top market, declined 2.1 percent last month, with weakness in Germany and France. Analysts expected an increase of almost 0.1 percent.

The United States, a close No. 2, posted a 0.9 percent gain, helped in part by the addition of the Grilled Onion Cheddar burger to its Dollar Menu. U.S. results exceeded analysts' target for a 0.3 percent decline.

Asia/Pacific, Middle East and Africa (APMEA) turned in a 9.5 percent decline, despite strength in Australia - steeper than the 5.8 percent analysts had anticipated. McDonald's cited continued weakness in Japan and the shift in the timing of the Chinese New Year.

Scares over the safety of China's chicken supply also took a small bite out of McDonald's sales there.

Not a McRib Issue

This is not a food quality scare issue (For details see Yum! The McRib is Back, Get Yours Today (After You Find Out What's In It); The Secret's in the Sauce!).

Rather, it's an affordability issue. People want value in the value meal and there is no value, either in terms of quality or price.

Sales rose in the US purportedly "helped in part by the addition of the Grilled Onion Cheddar burger to its Dollar Menu". Most don't want to know what's in it, and would not stop eating the stuff even if they did.

This all comes down to price and jobs. There are too few jobs, and the price of the value meal (by any name at any fast food company) is simply too high. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com