McDonald's sales stumble in August

by Monica Watrous
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OAK BROOK, ILL. — Global comparable sales for McDonald’s Corp. tumbled 3.7% in August on supplier issues in China and continued weakness in the United States.

In mid-July, food quality and safety issues were discovered at Shanghai Husi, a division of the OSI Group L.L.C., a supplier to McDonald’s in China. As a result, McDonald’s said its businesses in China, Japan and certain other markets experienced a significant negative impact to results, which translated to a 14.5% drop in comparable sales in the Asia/Pacific, Middle East and Africa (APMEA) region in August. Recovery strategies to restore consumers’ trust are under way, but the company expects a negative impact of 15c to 20c per share on third-quarter results in comparison to the prior year, reflecting lost sales, expenses associated with recovery efforts and an impact on the tax rate.

Continued marketplace headwinds in the United States also challenged the chain and led to a 2.8% drop in U.S. comparable sales during the month. McDonald’s said soft top-line results are expected to pressure U.S. margin performance in the third quarter.

In Europe, comparable sales slid 0.7%, as positive results in the United Kingdom were offset by weak performance in Russia.

“During August, McDonald’s global business faced several headwinds that impacted sales performance,” said Don Thompson, president and chief executive officer. “As a system, we are diligently working to effectively navigate the current market conditions to regain momentum. 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."

System-wide sales for the month dropped 2.9%, or 1.3% in constant currencies.

The results follow a 2.5% decline in global comparable sales in July, which analysts described as McDonald’s worst month in a decade.
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