McDonald's reports disappointing Q4

by Erica Shaffer
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McDonald's challenges in Asia continue to drag on the company's financial performance.

OAK BROOK, Ill. – Negative customer traffic in all major segments dragged on McDonald's Corp.'s fourth quarter earnings performance, and the company warned its first-quarter earnings performance is unlikely to improve.

Global comparable sales slipped 0.9 percent, while consolidated revenues fell 7 percent. In the United States, fourth-quarter comparable sales declined 1.7 percent and operating income declined 15 percent on poor guest traffic. The company attributed the negative performance to "ongoing broad-based challenges".

"2014 was a challenging year for McDonald's around the world. Our results declined as unforeseen events and weak operating performance pressured results in each of our geographic segments," Don Thompson, McDonald's president and CEO, said in a statement. "As we begin 2015, we are taking decisive action to regain momentum in sales, guest counts and market share. This involves driving foundational improvements in our major markets and continuing our recovery efforts in markets affected by unusual events."

Meanwhile, higher-selling, general and administrative and other expenses associated with positioning the business for the future impacted McDonald's earnings.

"As we begin 2015, we're exercising further financial discipline — starting with a capital-expenditure plan for the year of approximately $2.0 billion — our lowest capital budget in more than five years — as we're strategically targeting fewer openings in our most challenged markets, said Pete Bensen, CFO. "We believe this lower level of capital spending is prudent while we work to regain our business momentum and improve the sales and profitability at our more than 36,000 restaurants around the world."

Comparable sales in the company's Europe segment declined 1.1 percent on consumer confidence issues, particularly in Russia and Ukraine, the company said. Weakness in France and Germany also negatively impacted quarterly results. However, the United Kingdom delivered positive comparable sales and operating income.

McDonald's reported a 4.8 percent decline in comparable sales in the company's APMEA segment. Comparable sales dropped 4.8 percent and operating income declined 44 percent primarily on the lingering impact of the supplier issue on sales and profitability in China, Japan and certain other markets. However, sales and operating income benefited from solid performance in Australia.

Full-year results included a 1.0 percent decline in global comparable sales; revenue decline of 2 percent, and consolidated operating income decrease of 9 percent.

Thompson said McDonald's will continue to focus on the customer experience and regain trust in the brand despite headwinds the company continues to face.

"While January comparable sales are expected to be negative and results are expected to remain pressured, particularly in the first half of the year, I am energized by the opportunities ahead for McDonald's and remain confident that we can regain our momentum and build value for shareholders over the long term," Thompson concluded.

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