McDonald's Weak Q1 Earnings Reflect Struggles In Global Sales, Food Safety Scandal In Asia

McDonald’s Corp has reported disappointing first-quarter earnings as it reflected “negative guest traffic in all major segments.” Global sales had dropped due to fewer customers in in the Global Arches in the U.S. and other major markets in the world.

The company’s earnings per share missed expectation as store sales around the world fell 2.3 percent while same stores fell by 2.6 percent in the U.S. and 0.6 percent in Europe. McDonald’s also performed poorly in the Asia Pacific, Middle East and Africa in the first quarter with a drop of 8.3 percent in same-store sales, reports New York Times.

McDonald’s gloomy earnings revealed last week was a stark contrast to the growing popularity of fast-casual restaurants such as Chipotle. However, the company’s new chief executive, Steve Easterbrook, said McDonald’s is scheduled to announce “meaningful” changes to its menu in May.

“Where we need to fix the fundamentals, we need to act -- now,” said Easterbrook to investors in an earnings call. His urgent tone did not reflect in the company’s performance in the second quarter. McDonald’s earnings per share for the first quarter slumped 31 percent from the previous year to $0.84, which is below the $1.06 EPS predicted by analysts asked by Thomson Reuters.

The fastfood chain’s revenue dropped 11 percent from the previous year to $5.96 billion compared with the analysts’ forecasts of $6 billion. The first earnings report by McDonald’s under the leadership of Easterbrook indicates significant challenges the company continues to face.

McDonalds’ has been increasingly outperformed by the likes of Chipotle Mexican Grill and Panera. The fast-rising stars of food chains have grown by catering to customers who want customization combined with speed and high quality ingredients.

Easterbrook has already implemented a flurry of changes since taking over last March. He simplified offerings in thousands of restaurants in the U.S. and introduced premium sirloin burgers. He also promised to limit the use of antibiotics in chicken. Easterbrook added that McDonald’s was preparing to introduce more items into the menu.

Following the release of the earnings report, McDonald’s continues to struggle with sales since the efforts of its new CEO in the U.S. have not yet paid off, reports Nasdaq. Customer traffic has declined in all of McDonald’s major markets as the company deals with the changing tastes of the American consumer and food safety issues in Asia.

In 2014, McDonald’s supply chain partner, OSI Group, was involved in a public food safety controversy in China. A Chinese television station exposed the employees of the plant who were tampering with labels to extend the expiration dates of beef and chicken products. McDonald's said it is currently working on a turnaround plan to promote profitable growth.

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