McDonald’s reported a 21% decline in quarterly profit on Friday as sales slid across all regions, ending a challenging year on a poor note. Here are the most important points from the fourth-quarter earnings report.
What you need to know: McDonald’s (MCD) continues to face a tough challenge in the U.S., where the restauranteur is struggling to retain traction. Same-store sales for that market slipped 1.7% in the latest quarter, hurt by lower traffic and “competitive” challenges. McDonald’s has now reported weaker same-store sales in its home market for five consecutive quarters, though the latest decline wasn’t as severe as the 2.1% projected by analysts surveyed by Consensus Metrix. Results have been hurt by changing preferences: so-called fast-casual chains that churn out healthier meals quickly for just a few bucks more than what McDonald’s charges have taken some of the fast-food giant’s business.
The company says it is moving quickly to turn things around, aiming to simplify its menu and by unveiling a new marketing message centered around the word “love.” Those efforts haven’t yet paid off, but McDonald’s on Friday indicated the U.S. business is “more nimble” and has a plan to streamline the menu and court more local tastes.
The big number: Revenue across the company tumbled 7% to $6.57 billion, partly hurt by the stronger U.S. dollar. Net income slid to $1.1 billion from $1.4 billion a year ago. Globally, same-store sales were down 0.9%, hurt by weak traffic at all major segments. Analysts had expected a 1.5% drop. Europe’s same-store sales were down 1.1%, while the Asia Pacific, Middle East, and Africa region reported a 4.8% decline.
What you might have missed: Though McDonald’s struck a hopeful tone throughout the earnings release, CEO Don Thompson conceded that same-store sales in January “are expected to be negative and results are expected to remain pressured, particularly in the first half of the year.” Though McDonald’s aimed to reassure investors that the financial targets it outlined for the three-year period ending in 2016 remain on track, the company faces “meaningful headwinds.”
“Over the next 12 months, our charge is to ensure that we are adapting to the changing marketplace,” Thompson said. Fast-food chains such as McDonald’s are facing pressure as consumers are spending more of their money at fast-casual chains, such as Chipotle (CMG) and Panera (PNRA). Those rivals offer menus that consumers perceive to be healthier, as well as fairly quick service that doesn’t require a server.