McDonald’s posts small gains in tough 2013 trading year

Jon Condon, 25/01/2014

The world’s single largest customer for beef has continued to defy the tough global economic environment to post modestly improved trading and financial results for its full year ended December 31.

Burger giant McDonald's delivered slightly higher revenues, operating income and earnings per share compared with the previous full year, fuelled by modest growth across most regions.

The yearly result, announced yesterday, came despite disappointing results during the fourth quarter.

The performance reflected the continued defensive spending patterns of consumers around the world during tough economic times, trading down from more expensive restaurant and food service options to more price-competitive food service options.

Australia is a dominant supplier of beef burger patties and grinding beef for McDonald’s restaurants, exporting patties to more than 25 countries where the company has a presence.

The full 2013 results included:

  • Global comparable sales increase of 0.2pc, reflecting higher average check and negative comparable guest counts
  • Consolidated revenue increase of 2pc, on $28.1 billion in sales
  • Consolidated operating income increase of 2pc compared with last year, at 8.204 billion.

The company’s fourth quarter (October-December) was a difficult trading period, with global comparable sales decreasing 0.1pc, reflecting fewer customers than this time last year, and dragged down by a 1.4pc decrease in sales in its US restaurants. Fourth-quarter net income worldwide was flat at $1.4 billion, while total revenue rose 2pc to $7.09 billion.

In the company’s US operations, sales decreased 1.4pc in the fourth quarter, while the Europe region generated sales growth of 1pc and increased operating income by 3pc on the previous year, as a result of strong performance in the UK, Russia and France partially offsetting lower results in Germany.

McDonald’s Asia, Pacific and Middle East region (including Australia) saw fourth quarter comparable sales decline 2.4pc, and income decline 8pc, reflecting weakness in Japan and relatively flat performance in China and Australia.

McDonald's chief executive Don Thompson said 2013 was a challenging year, but the company had a renewed focus on global growth priorities for 2014.

He said McDonald’s needed to establish “a stronger customer relationship this year” and to regain consumers’ trust through improved in-restaurant execution, more ‘relevant’ menu items and improving marketing communications.

“That includes greater use of digital media, because McDonald’s has not played in that arena in a strong way.”

Australia is one of the “key opportunity markets” McDonald’s executives singled out last week as being so important they merit special attention.

Comparable sales in Australia were flat in the last quarter and lacklustre throughout 2013.

CEO Don Thompson said the way to jump-start sales in Australia will be to create “market plans anchored around being even more relevant with local consumers. We are emphasizing value across all price tiers and we are launching more premium products to create excitement across the menu.”

Recent premium product introductions have included the Angus McOz.

McDonald’s also appears to be moving away from its controversial ‘Dollar Menu’ items (known as Extra Value in some markets) which, while designed to pull more customers through the door, left little in the way of margin, and put pressure on commodity prices on items like ground beef.

The company fell short of achieving its earlier stated aim of establishing 1300 new restaurants worldwide last year, ending the year with 949 new sites. This year, however, store openings are forecast to include 250 in the US, 320 in Europe and 830 in Asia (of which 300 will be in China) for a total of 1400.

McDonald’s is the world’s leading global foodservice retailer with more than 35,000 locations serving 70 million customers in 119 countries each day.





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