McDonald’s sales dip in US, underscoring comeback challenges

The Associated Press
AP

NEW YORK (AP) — McDonald’s is trying stage a comeback, but still has plenty of work to do in its flagship U.S. market.

The world’s biggest burger chain said U.S. sales dipped 1.3 percent at established locations for the final three months of 2016. Its performance was better overseas, and the sales figure rose globally.

The Oak Brook, Illinois company attributed the sales decline at home to a tough comparison from the year-ago period, when it introduced an all-day breakfast menu. The results nevertheless underscore the hurdles McDonald’s faces in its push to revitalize its image while facing broader industry challenges, including supermarkets and convenience stores selling more prepared foods and cheaper groceries encouraging people to eat at home.

Earlier this month, The NPD Group said it expects customer traffic for the restaurant industry to remain “stalled” this year, as it was in 2016.

McDonald’s isn’t alone in struggling to attract more customers. Starbucks CEO Howard Schultz has said the retail landscape would undergo a “seismic” change as people do more of their shopping online, leading to less foot traffic in general. The coffee chain’s transactions at established U.S. locations slipped by 1 percent in the previous quarter.

McDonald’s, meanwhile, has conceded that it failed to keep up with changing tastes and that it’s speeding up efforts to transform into a “modern, progressive burger company.” It recently introduced its Big Mac in different sizes, for instance, and has been testing fresh beef for some of its burgers.

Heading into 2017, McDonald’s said it would focus on growing customer traffic.

The U.S. sales decline for the end of 2016 snaps a streak of five quarters of increases. But those increases could have been the result of higher prices or people ordering different menu items. For all of 2016, McDonald’s saw guest counts decline 2.1 percent at established locations, according to a regulatory filing.

That marks the fourth straight year of declining guest counts at home. The company also trimmed its U.S. store base for the second year in a row after decades of expansion, ending the year with 14,155 locations.

David Palmer, an RBC Capital Markets analyst, said U.S. sales trends may improve for McDonald’s this year as it rolls out more changes like the different Big Mac sizes and value deals that can help draw customers.

Globally, McDonald’s expanded its footprint and had 36,899 locations at year’s end.

The company said its International Lead unit, which includes the United Kingdom, saw sales rise 2.8 percent at established locations. The High Growth unit, which includes China, saw sales increase 4.7 percent. Sales at established locations for the Foundational segment, which includes Japan, rose 11.1 percent.

McDonald’s Corp. said it earned $1.44 per share for the fourth quarter, topping the $1.41 per share that Wall Street expected, according to FactSet.

Revenue was $6.03 billion, above the $6 billion analysts expected.

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