Food safety issues in Asia affect McDonald's sales

by Meat&Poultry Staff
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McDonald's global sales woes continue.

OAK BROOK, Ill. – Food safety concerns in Asia fueled McDonald's Corp.'s sales woes as the company reported a 3.7 percent decline in global comparable sales for August.

In the Asia/Pacific, Middle East and Africa region (APMEA), sales plunged 14.5 percent, while sales at existing stores in the United States declined 2.8 percent. Sales in Europe slipped. 0.7 percent. The company expects the food-safety concerns in Asia to impact third quarter results by 15 cents to 20 cents per share.

"During August, McDonald's global business faced several headwinds that impacted sales performance," said Don Thompson, president and CEO. "As a system, we are diligently working to effectively navigate the current market conditions to regain momentum. For the long term, we remain focused on strengthening the key foundational elements of our service, operations and marketing to maximize the impact of our strategic growth priorities for our customers and our business."

Food-safety issues were discovered at Shanghai HUSI, a division of the OSI Group LLC, a supplier to certain food companies in China, including McDonald’s. In response, McDonald's announced recovery efforts that included tougher food-safety standards for its restaurants and suppliers in China.

"As we continue to assess the impact of the supplier issue in China, we currently estimate that this issue will negatively impact third quarter results by about $0.15 - $0.20 per share in comparison to prior year results," the company said. "This is largely due to a combination of lost sales, expenses associated with our recovery efforts and the impact of these items on the third quarter tax rate, which is expected to be above the Company's outlook for the full-year tax rate of 31-33 percent."

Meanwhile, sales for the chain's core US market continued to slide. McDonald's attributed the result to sluggish industry growth and competition. The company is addressing the issue through service, value and menu opportunities to enhance customer loyalty.

"Soft top-line results are expected to pressure US margin performance in the third quarter," the company said.

A strong performance in the United Kingdom offset losses in Russia, where food safety officials have closed five restaurants and made unannounced inspections of other locations. McDonald's said premium beef and chicken offerings along with ongoing expansion of breakfast and blended ice beverages supported results.

"For the third quarter, weak consumer sentiment is expected to impact restaurant sales and profitability, particularly in certain predominantly company-operated markets," the company said.

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