By Savyata Mishra
(Reuters) – McDonald’s posted a steeper-than-expected drop in quarterly U.S. comparable sales on Monday, as demand took a hit from a brief E.coli outbreak while diners remained watchful of their spending.
Comparable sales in the U.S., McDonald’s biggest market, fell 1.4% in the fourth quarter, its steepest drop since the height of the COVID-19 pandemic almost five years ago when restaurants limited operations to drive-thru and delivery.
Analysts on average had estimated a 0.4% decline, according to data compiled by LSEG.
Shares of the company rose 1.1% before the bell.
The burger giant saw customer visits weaken following an E.coli outbreak that started on October 22 and forced McDonald’s to temporarily suspend sales of its Quarter Pounder hamburgers in a fifth of its 14,000 U.S. restaurants.
The U.S. Centers for Disease Control and Prevention on December 3 ended its investigation of the incident, which sickened hundreds and killed at least one person.
Similar to fast-food rivals such as Yum Brands and Wendy’s, McDonald’s also ramped up its limited-time offers and meal deals throughout 2024 in an attempt to spur spending among customers preferring to eat meals at home.
The company extended its $5 meal deal launched in June into December and introduced Chicken Big Mac in October, along with other special releases.
Customer traffic ticked up slightly in the quarter from last year, McDonald’s reported, but that increase was offset by a smaller average amount spent per customer per visit.
Analysts have warned that the company’s overreliance on discounts, which now account for over a third of sales, according to BTIG analyst Peter Saleh, could pressure franchise margins in the future.
“In our view, the challenge McDonald’s faces in the months and quarters ahead will be weaning customers off these deep discounts,” Saleh said.
Comparable sales in the company’s International Developmental Licensed Markets segment rose 4.1% in the quarter ended December 31, beating estimates of a 0.43% drop. The improvement was led by Middle East and Japan markets.
Sales in international markets rose 0.1%, saddled by weakness in Britain.
Global same-store sales increased 0.4% in the quarter, a surprise rise compared with analysts’ expectations of a 0.63% decline.
McDonald’s posted a 5% drop in net income to $2.04 billion on an adjusted basis, compared to estimates of $2.07 billion.
(Reporting by Savyata Mishra in Bengaluru and Waylon Cunningham in New York; Editing by Sam Holmes)
Comments