McDonald's Sales Fall Faster Than Expected as New CEO Takes Helm

Sales In U.S. Down 4.0%, Snapping Brief Return to Growth

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McDonald's new CEO Steve Easterbrook
McDonald's new CEO Steve Easterbrook

McDonald's Corp. posted a worse-than-predicted drop in February sales after competition grew fiercer in the U.S., a sign its new CEO will have a deeper hole to dig out of as he works on a comeback.

U.S. sales at stores open at least 13 months fell 4.0% in February, the Oak Brook, Illinois-based company said Monday. Analysts had estimated a 0.7% drop, according to Consensus Metrix. The sales decreased 1.7% globally, compared with a projection of a 0.3% dip.

The results underscore the challenges facing Steve Easterbrook, a McDonald's veteran who took over as CEO this month. In Easterbrook's first week on the job, McDonald's announced plans to stop serving chicken raised with some antibiotics in its U.S. restaurants. The company also is revamping its U.S. operations as it tries to stem the exodus of customers to fast-casual chains like Chipotle Mexican Grill Inc. and Panera Bread Co.

"Consumer needs and preferences have changed," the company said in Monday's statement. "McDonald's current performance reflects the urgent need to evolve with today's consumers, reset strategic priorities and restore business momentum."

Asia woes
McDonald's also continues to struggle in Asia, with February sales dropping 4.4% in the region. That follows a drop of almost 13% during January, dragged down by a health scare and supply problems.

The latest figures put pressure on Mr. Easterbrook to move quickly, said Will Slabaugh, an analyst at Stephens Inc. in Little Rock, Arkansas.

"This likely ups the urgency in terms of this new management team putting a plan out there to turn around the business," he said. "We're seeing that these negative results are continuing and investors need to see a viable alternative."

The company has suffered a series of setbacks in Asia, including the rationing of french fries in Japan and a scandal involving a meat supplier. The vendor, Shanghai Husi Food Co., was accused of repackaging old meat in July, prompting McDonald's to take products off its menus in the region.

The woes have taken a heavy toll in Japan, where McDonald's lost $186 million in 2014. The company's sales plunged 29% in that country during February.

Recovery sputters
U.S. sales, meanwhile, had been showing signs of recovery ... until last month. They climbed 0.4% in January and posted a similar gain in December. That followed a streak of 13 straight months without growth in its home market.

McDonald's is revamping its U.S. operations in a bid to speed up service and draw customers back to its roughly 14,000 domestic restaurants. As part of the effort, McDonald's plans to expand its Create Your Taste program, a customizable sandwich system, to more U.S. restaurants this year.

"The goal going forward is to be a true destination of choice around the world," the company said on Monday, "and reassert McDonald's as a modern, progressive burger company."

~ Bloomberg News ~

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