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McDonald's sales slump despite all-day breakfast success

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(Read caption) A McDonald's sign is seen in Miami.

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An underwhelming financial report from McDonald’s comes after almost one year after the launch of the all-day breakfast menu that revived interest in the fast-food giant.

McDonald’s reported weaker than expected earnings on Tuesday, following a three percent drop in the fast food giant's shares during pre-market trading. The fast-food restaurant reported 3.1 percent growth in sales from existing stores; analysts surveyed by Consensus Matrix expected to see 3.6 percent growth. The company earned $1.25 a share, lower than the expected $1.39 a share. McDonald’s global sales grew by 3.1 percent, spurred by growth in Britain, Australia, and Canada.

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The weaker than expected sales follows some of the best growth McDonald’s has seen in recent years. In this year’s first quarter, same-store sales for the company grew 6.2 percent, the fastest growth for the company in four years. Chief executive officer Steve Easterbrook has shifted McDonald’s to focus more on food quality and changing food trends since taking over in 2015

In a 2015 video overview of Mr. Easterbrook’s vision for the fast-food restaurant, he cited the need to restructure McDonald’s for "stronger financial discipline, faster decision-making, and hard-edged accountability." Changes included refranchising 4,000 stores both in and out of the United States by 2018 and a change in headquarters from the suburbs of Chicago to a location within the bustling city. Recently, McDonald’s has offered franchise rights for restaurant locations in Malaysia and Singapore. Those changes have had a short-term negative financial impact, and McDonald’s stock value decreased by 20 cents per share in the second quarter.

McDonald’s financial report comes almost a year after the introduction of an all-day breakfast menu. Breakfast now accounts for 25 percent of the chain's overall revenue. 

The all-day breakfast menu helped McDonald’s draw in new customers in the months following the launch. According to the NPD Group, a market research company, 30 percent of customers ordering from the all-day breakfast menu in December 2015 had not been a customer of McDonald’s in the previous month. The restaurant will be expanding the breakfast menu in September to include a wider variety of breakfast sandwiches, hoping the bigger breakfast menu will renew interest just as the launch did the year before.

McDonald’s focus on food trends has led the company to experiment with new products. There have been successful efforts by McDonald’s in Dallas to use fresh beef in Quarter Pounders. McDonald’s may expand this offering if safety standards can be met. McDonald’s also plans to end the use of milk and chicken with added hormones and antibiotics by 2018.

The disappointing sales report for McDonald’s has not dimmed Easterbrook’s vision for the company and its impending changes. Easterbrook said in a recent statement that the report of continued sales growth is "a clear indication that customers are responding to the steps we're taking to deliver the menu and value options they want at the convenience of McDonald's."


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