McDonald's Q1 profit slips as US sales decline
By Candice Choi, AP
April 24, 2014, 12:00 am TWN
NEW YORK--McDonald's is fighting to hold onto customers in the U.S.
The world's biggest hamburger chain said sales at established U.S. locations fell 1.7 percent in the first three months of the year as guest counts declined. After a decade of consistent growth, sales also declined last year as McDonald's struggled to roll out an array of new menu items and fend off competitors.
CEO Don Thompson said in call with analysts and investors Tuesday that the company is working to improve its operations and marketing in key regions, including the U.S.
"It's important to underscore it will take time for consumers to notice the changes and reward us with increased visits," he said.
While acknowledging that McDonald's continues to face numerous challenges, Thompson stressed that the decline in U.S. guest counts in the latest quarter was largely the result of severe weather. Last week, however, Chipotle said its sales rose 13.4 percent on stronger customer traffic.
The disappointing performance in the U.S. reflects the struggles McDonald's is facing as people flock to chains that position themselves as higher-quality alternatives. Thompson has noted that people with more spending money increasingly seem to be heading to such chains and that McDonald's needs to focus on underscoring value for its more cash-strapped customers.
The focus on keeping prices affordable has pressured profit margins, particularly given rising costs for ingredients. In the U.S., McDonald's said its ingredient costs rose 3 percent, driven primarily by protein. Inflation is expected to continue at a similar level for the second quarter before easing in the second half of the year.
In the meantime, McDonald's is trying to adapt to shifting eating trends in a variety of ways, including the rollout of new prep tables in the U.S. that can hold more sauces and toppings.
The idea is to eventually offer greater customization on its menu while keeping orders easy to assemble for workers. Speed and accuracy have been an issue for McDonald's as it stepped up the pace of new menu items.