McDonald's may have a hard time turning around recent sales declines as the hamburger giant loses its appeal with younger consumers.
McDonald's (mcd) reported its biggest decline in global same-store sales since 2003 this month, and in the U.S. sales at stores open 13 months or longer sales have been flat of falling so far this year.
The company may have a hard time reversing the dropping sales as diners in their 20s and 30s, long a key customer base for the world's largest restaurant chain, look to healthier, fast-casual competitors such as Chipotle Mexican Grill and Panera Bread Co. (pnra), reported the Wall Street Journal.
The number of U.S. diners aged 19 to 21 who eat at McDonald's each month has declined 12.9 percentage points since the start of 2011, while monthly diners age 22 to 37 have remained flat over the same time frame, according to Technomic data.
Over that period, consumers have shifted their mealtimes to fast-casual chains where monthly visits increased by 2.3 percentage points for those age 19 to 21 and 5.2 percentage points for those age 22 to 37.
Fast-casual restaurants, including others such as Five Guys and Corner Bakery Cafe, mix of fresher ingredients and custom ordering with the convenience of fast-food. These types of outlets have multiplied over the past decade from 9,000 to more than 21,000 as McDonald's locations have hovered around 14,000, Technomic said.
As McDonald's faces a dropoff in younger consumers, it is also trying to cope with a host of global setbacks. A Chinese supplier was accused of selling expired meat last month, leading to a sales drop of 7.3% in the Asia/Pacific, Middle East and Africa regions. Then last week, it was forced to close locations in Moscow after alleged sanitary violations.
Executives have acknowledged the issues at home and set up a "learning lab" at a restaurant in June in order to gain insight into what consumers are looking for in a fast-food dining experience. Still, any meaningful changes will be difficult to implement given McDonald's' large operation and complex supply chain, say analysts.