McDonald’s August Sales Figures Fall Short of Estimates
McDonald’s Corp. (NYSE:MCD) reported same-stores sales falling short of analysts’ estimates for August. Sales at stores open at least 13 months rose 3.5%, while analysts had projected a gain of 5%. U.S. sales climbed 3.9%, missing analysts’ estimates for a 4.5% gain.
The fast-food giant’s sales were hurt last month as consumers restrained spending and Hurricane Irene cut down on traffic, knocked out power to more than 6 million homes and businesses, and closed restaurants all along the East Coast. It is thought the storm alone, which hit the last weekend of August, may have been responsible for a 0.5% decline in sales for the entire month.
Meanwhile, sales in Europe climbed 2.7%, while sales in Asia, Africa, and the Middle East fell off 0.3%. Both markets fell short of analysts’ expectations, with European sales expected to grow 6% and sales in Asia, Africa, and the Middle East expected to gain 3.7%. While sales grew in China and Australia, they were weak in Japan, with same-store sales down 8.2% last month, earning the region its first negative growth figures since November 2009.
Higher prices might be partly to blame for slumping sales. As costs for ingredients like beef and cheese rose over the last year, McDonald’s has passed on higher costs to consumers, boosting prices 1% in the U.S. in March, and then another 1.4% in May. McDonald’s has also increased menu prices in other markets, including China, one of its largest. And with commodity prices still climbing, McDonald’s could soon be looking at another menu price increase.
The good news is that McDonald’s competitors are facing the same higher commodity prices, and will either have to absorb the costs, or pass them on to consumers as McDonald’s has done, ultimately hurting their sales figures. Burger King (BKC), Wendy’s (NYSE:WEN), Yum! Brands (NYSE:YUM), Darden Restaurants (NYSE:DRI), Starbucks (NASDAQ:SBUX), Jack in the Box (NASDAQ:JACK), and Tim Hortons (NYSE:THI) are all facing declining revenue as higher prices, combined with wary consumers, are hurting sales.