McDonald’s profit plummets 30% in Q3

McDonald’s Corp. chief executive Don Thompson did not mince words when he called the hurdles the company faced in the third quarter “more formidable than expected” and vowed that “significant challenges call for equally significant changes in the way we do business.” The brand noted that those changes would encompass a “new global approach designed to increase its relevance with customers and drive guest traffic,” including three initiatives. A “McDonald’s Experience of the Future” would attempt to elevate the menu and operations experience by capitalizing on the chain’s investments in reimaging and technology upgrades. A long-awaited digital strategy would be built around simplifying ordering, paying and redeeming mobile offers, beginning with the adoption of Apple Pay. The brand will also review its investments and redirect spending toward initiatives like the “Experience of the Future” plan and the new digital strategy. The Oak Brook, Ill.-based company reported its most negative quarterly numbers in recent memory, including a 30-percent decline in net income for the Sept. 30-ended period to $1.07 billion, or $1.09 per diluted share, compared with $1.52 billion, or $1.52 per diluted share, a year earlier. Revenue fell 5 percent to $6.99 billion in the third quarter, reflecting a 3.3-percent decline in global same-store sales, with weakness in virtually all of its core markets. Sales slide everywhere In a statement, the company flatly admitted that “initiatives to address the current market dynamics did not translate into improved financial results” in the United States, where same-store sales fell 3.3 percent in the third quarter. Operating income also decreased 10 percent. McDonald’s said that Mike Andres, new president of McDonald’s USA, and his team would quickly implement new initiatives, including: • Moving many key decisions from the corporate office to regional managers in the field. • A revamped marketing strategy that links national messaging around food quality, brand transparency and people initiatives. • A simplified menu that showcases the core products as well as locally relevant menu options, with new customization features for guests. The Asia/Pacific, Middle East and Africa, or APMEA, division booked a 9.9-percent decrease in same-store sales, as the second major food-safety scare in China’s food supply in 18 months has wreaked havoc on restaurant chains like McDonald’s and KFC. The supply issue also affects Asia’s other crucial market, Japan, which has struggled for years since the March 2011 tsunami. Europe’s same-store sales fell 1.4 percent, as only the United Kingdom stood out as a bright spot able to deliver sales growth. Germany’s system remains weak as it has been for much of 2014, and problems persist in Russia, where consumer confidence has faltered amidst ongoing tensions with Ukraine and possible economic sanctions from the West. Russian officials have also stepped up food safety inspections at 200 of McDonald’s 440 locations in the country, and Russian courts already have closed nine restaurants there.