McDonald’s store sales drop in April as Asia demand declines

McDonald’s Corp., the world’s biggest restaurant chain, said sales at stores open at least 13 months fell 0.6% last month as growth slowed in its Asia Pacific region.

Analysts estimated a 0.5% drop, the average of 11 estimates from Consensus Metrix. Sales at stores in the company’s Asia Pacific, Middle East and Africa unit fell 2.9%, the Oak Brook, Illinois-based company said today in a statement. Analysts projected a 1.4% decline.

Restaurant chains have been facing increasing consumer scrutiny in China following an outbreak of bird flu and also after a former poultry supplier to Yum! Brands Inc. was investigated for selling chicken with excessive levels of antibiotics. McDonald’s has sought to compete with Yum’s KFC and Pizza Hut chains in China by adding stores and new menu items.

In Asia, April’s sales decline was due to the avian flu in China and “softer results” in Japan and Australia, McDonald’s said in the statement.

McDonald’s fell 0.2% to $102.08 at 9:36 a.m. in New York. The shares advanced 16% this year through yesterday, compared with a 14% gain for the Standard & Poor’s 500 Restaurants Index.

The Big Mac seller is facing a “persistently challenging macro environment” as it begins the second quarter, Chief Executive Officer Don Thompson said in the statement.

U.S., Europe

Sales increased 0.7% in the U.S. and fell 2.4% in Europe last month. Analysts projected drops of about 0.1% and 1%, respectively, according to Consensus Metrix, a researcher owned by Kaul Advisory Group in Wayne, New Jersey.

McDonald’s surprise gain in the U.S., a turnaround from the prior month, was fueled by the introduction of chicken McWraps, value items and breakfast, the company said in the statement. March comparable-store sales declined 1.2% at McDonald’s domestic restaurants.

The chain, with about 14,100 U.S. locations, has been rolling out new menu items, including the McWraps and also egg- white sandwiches to lure customers from competitors. This year, Burger King Worldwide Inc. has introduced veggie and turkey burgers, while Wendy’s Co. is selling grilled-chicken flatbread sandwiches.

Avian Flu

McDonald’s April sales were hurt by sensitivity around the chicken industry in China. Yum, which has more than 5,400 restaurants in China, said its first-quarter same-store sales tumbled 20% after a former poultry supplier was investigated for selling chicken with too much antibiotics. More recently, China is facing a deadly outbreak of avian flu, which is also negatively affecting KFC sales.

Same-store sales at McDonald’s locations in Japan dropped 3.7% in April, the 13th straight monthly decline. Comparable, or same-store, sales are an indicator of a company’s growth because they include only older restaurants.

McDonald’s has about 34,500 restaurants worldwide, of which 81% are franchised.

Bloomberg News

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