McDonald's July Global Comps Down 2.5% On U.S. Weakness, China Safety Issues

(RTTNews) - Fast food giant McDonald's Corp. (MCD) said Friday that sales at its established stores declined 2.5 percent in July, reflecting lower sales in the U.S. as well as the negative impact of food quality and safety issues at a supplier to the company in China.

Looking ahead, McDonald's said its global comparable sales forecast for 2014 is now at risk due to the China supplier issue.

The Oak Brook, Illinois-based hamburger chain's global comparable sales for the month of July decreased 2.5 percent, compared to an increase of 0.7 percent in the same month a year ago.

Comparable sales represent sales at all restaurants, whether operated by the company or by franchisees, in operation at least thirteen months including those temporarily closed.

Don Thompson, President and Chief Executive Officer of McDonald's said, "Although July's results were not in-line with McDonald's expectations, we intend to strengthen our performance by addressing the current business headwinds with the discipline and conviction that inspire our customers' trust and loyalty."

The world's largest restaurant chain said system-wide sales or sales at all restaurants, whether operated by the company or by its franchisees, declined 0.5 percent on a reported basis, or 0.0 percent in constant currencies, for its restaurants worldwide.

Geographically, July comparable sales in the U.S. declined 3.2 percent "amid continuing broad-based challenges", compared to prior year's increase of 1.6 percent. U.S. system-wide sales declined 2.2 percent for the month.

In Europe, comparable sales increased 0.5 percent, compared to an increase of 1.9 percent last year. The results were led by positive performance in the UK and France, partly offset by negative results in Germany and Russia.

Europe's system-wide sales for the month grew 6.9 percent from last year on a reported basis, and increased 3.3 percent in constant currencies.

Comparable sales in Asia/Pacific, Middle East and Africa, or APMEA region declined 7.3 percent, compared to the prior year's decrease of 1.9 percent. The results the impact of food quality and safety issues at a supplier to McDonald's and other food companies in China.

As a consequence, results in China, Japan and certain other markets experienced a significant negative impact. The affected markets represent about 10 percent of global systemwide sales and negatively impacted the segment's July comparable sales by over 700 basis points.

System-wide sales in the region declined 2.8 percent, and also decreased 2.9 percent in constant currencies.

Looking ahead, McDonald's said its global comparable sales forecast for 2014 is now at risk due to the China supplier issue. The company had earlier said that full-year 2014 global comparable sales are expected to be relatively similar to its year-to-date June performance.

McDonald's plans to release sales information for the month of August 2014 on September 9.

MCD is trading at $93.51, up 0.20 0.22 on a volume of 1.08 million shares.