Poor Performance in Asia Hurts McDonald’s January Sales

While slightly better than expected same-store results for McDonald’s Restaurants in the United States and Europe saw comparable revenues rise in January by 0.4% and 0.5%, respectively, plummeting sales of -12.6% in Asia/Pacific, Middle East and Africa (APEMEA) markets added up to an overall decrease in global sales of -1.8%, the Oak Brook, Illinois, USA-headquartered company reported on February 9.

The disappointing performance in the APEMA region was largely attributed to poor results in East Asia. According to McDonald’s, this reflected “broad-based consumer perception issues in Japan, along with the lingering impact of the supplier issue and a shift in timing of Chinese New Year [February 19 in 2015; January 31 in 2014] in China and other markets. Brand recovery continues to be a top priority throughout the segment, with emphasis on rebuilding customer trust by strengthening quality and affordability perceptions.”

The “supplier issue” in Japan refers to the french fry shortage caused by shipment slowdowns of frozen product from the US West Coast due to labor disputes, as well as lingering concerns over the quality of chicken menu offerings following negative food safety publicity about a major producer in China, and the reports of consumer discoveries of plastic in Chicken McNuggets servings and a human tooth in an order fries.

McDonalds-Dengshikou-Beijing-2

The bottom line for McDonald’s in Japan was said to be a loss of $186 million in 2014. Sales in that country, generally a shining light on the Golden Arches, were reportedly down 39% in January.

On the positive side of the monthly ledger, the US comparable sales increase of 0.4% was attributed to a positive a breakfast daypart performance that was, however, “largely offset by the impact of aggressive competitive activity.” Presumably this refers to BOGO couponing and discounting among virtually all of the major quick service restaurant chains in North America.

Europe's comparable sales increased 0.5% in January, as positive performances in the United Kingdom and Germany were largely offset by negative results in France and Russia. While market dynamics remain challenging in the near term, McDonald's Europe says it is focused on driving sales and guest traffic by strengthening local value platforms, highlighting the quality of core and premium products and aggressively pursuing growth opportunities, particularly at breakfast time.

Meanwhile, McDonald’s corporate headquarters is preparing to welcome a new president and chief executive officer, following the impending retirement of Don Thompson. Waiting in the wings to chart the future course for the world’s largest fast food restaurant business beginning March 1 is Steve Easterbrook, who has spent 20 of his last 22 years with the company.

"Steve is a strong and experienced executive who successfully led our UK and European business units, and the board is confident that he can effectively lead the company to improved financial and operational performance," said Andrew McKenna, non-executive chairman of the board of directors.

For the past two years Easterbrook, a citizen of the United Kingdom, has headed up two British restaurant chains. Prior to that he was senior executive vice president and chief brand officer at McDonald’s, leading efforts to elevate marketing, advance menu innovation and create an infrastructure for its digital initiatives.