The market isn’t looking too good for McDonald’s (NYSE:MCD) right now
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McDonald’s (NYSE:MCD) is certainly having a hard time. It’s one thing that the hamburger chain reported weak earnings again but it’s another for it to witness disappointment in all its divisions.
McDonald’s (NYSE:MCD) is still feeling the after effects of the food scandal, which caused a drop in comparable same store sales by 19% causing a harsh decline in operating income by 56%.
As if it weren’t bad enough, Europe division of the giant fast food chain has also joined in on the decline even though it had been pretty reliable in the previous quarter. However, this region has now experienced a drop in comps by 1.4% as compared to last year. The operating income in the region also experienced a drop by 2%.
Out of all the regions, the U.S. is suffering terribly. Comps are down by 3.3%, which is more than McDonald’s (NYSE:MCD)’s last quarter. This is the fourth time in a row that same-store sales have dropped.
McDonald’s (NYSE:MCD) tried its best to pick up pace and compete with other competitors by launching its McCafe line. Technomic reported that nearly one of every three customers bought breakfast at McDonald’s. This made around 20% of the company’s total revenue.
However, when McDonald’s (NYSE:MCD) was busy tampering with the breakfast market, rivals like White Castle, Taco Bell and Starbucks (NASDAQ:SBUX) saw the gaps in the market and filled them with their day meal offerings.
After Yum! Brands, the owner of Taco Bell reported its earnings; it became obvious that the company had surprising results from its Mexican line even though it was also a company that suffered from the food scandal.
There was an increase in same restaurant sales by 3% for the quarter; however this was majorly due to an increase by 6% in the breakfast line sales, which were newly launched. This suggested that Taco Bell was losing share in the lunch as well as dinner dayparts while witnessing increased sales in its morning meals.
Taco Bell even imitated McDonald’s (NYSE:MCD) way of giving away coffee in order to attract customers. It isn’t a surprise that burgers are taking a hit. It isn’t just consumer’s disinterest but also tough competition from rivals like Burger King Worldwide (NYSE:BKW) and Wendy’s (NASDAQ:WEN).
The point to be noted here is that McDonald’s (NYSE:MCD) isn’t at its best. It’s just struggling really badly against some stiff competition and has shown very little innovation to deal with its current crises.
Chipotle Mexican Grille (NYSE:CMG) is another competitor that is eating away the market share with comps increasing by 20% in its last quarter. This company witnessed a 57% increase in its net profits.
So to put it short, McDonald’s (NYSE:MCD) is struggling to cope with the changing consumer behavior and preferences in the U.S. and its troubles in other regions.
The hamburger chain did pretty well in staying in the game with its stock doing well enough despite all the blows. However, the breakdown that is occurring in the company in all its regions isn’t sending positive signs to investors. McDonald’s (NYSE:MCD) will have to do more than just give away free coffee. Consumer preferences must be catered to and menus must be improved in order to have a fighting chance at survival.