McDonald's ME sales fall on food safety scandal
New York, August 9, 2014
McDonald's said its global decline included a 3.2 per cent drop in the US and a 7.3 per cent drop in the unit encompassing Asia, the Middle East and Africa over the impact of a food safety scandal in China.
The world's biggest hamburger chain said a key sales figure fell 2.5 per cent in July, according to a report in our sister publication, the Gulf Daily News.
Its China division took a major hit in late July when a TV report showed workers at one of its suppliers repacking expired meat.
Many McDonald's restaurants in the country were left without beef and chicken supplies as a result.
Even as McDonald's restaurants get back to serving the full menu, sales are likely to continue suffering given the sensitivities around food safety in China.
Yum Brands, which owns KFC and Pizza Hut, says it did not rely as heavily on the supplier in question. But it has nevertheless been ensnared in the scandal as well and has seen its sales drop significantly.
McDonald's Corporation, which has more than 35,000 locations around the world, has warned that the scandal put its global sales forecast for the year 'at risk.' The company had previously said it expects sales to be relatively flat.
Back in the US, McDonald's has been unable to boost sales amid heightening competition and shifting eating habits.
Chains like Chipotle, for instance, are gaining favour by touting more wholesome ingredients and the ability to customize food.
McDonald's chief executive Don Thompson has also noted that the lower-income customers that tend to go to McDonald's are struggling more financially, making it more difficult to get them to spend money on eating out.
Thompson has also said the company complicated its menu and slowed down service by introducing too many items too quickly. He said the company is working on getting the basics rights Ð such as improving service.
The one bright spot in July was Europe, where sales at established locations edged up 0.5 per cent. – TradeArabia News Service