P&L

For McDonald’s, Europe is the land of opportunity

April 22, 2014
April 22, 2014

The numbers: Meh. The world’s largest hamburger-slinger posted first-quarter profits of $1.2 billion, down 5% from the same period last year. Global sales came in a shade under $4.5 billion, marginally higher (1%) than in 2013. Shares are down slightly on the news.

The takeaway:forgettable 2013 for McDonald’s might be over, but 2014 isn’t looking much better so far. The global fast food behemoth saw its customer traffic fall in the US, Asia Pacific, and Middle East and Africa regions during the first three months of the year. Americans in particular are leaving the hamburger giant behind—comparable sales fell 1.7% and profits declined 3% in the US during the first quarter. The only bright spot for McDonald’s was Europe, where both sales and profits rose. McDonald’s sees Europe as a potential win going forward. And rightfully so—the region makes up over 40% of its global sales.

What’s interesting: McDonald’s has found itself embroiled in an all-out fast food breakfast war, and it’s pulling out all kinds of tricks to keep Egg McMuffins on everyone’s mind. McDonald’s offered free coffee for a two-week stint earlier this month to woo customers to the chain at breakfast time. While the move wasn’t explicitly a response to Taco Bell’s newly minted morning menu—which includes a waffle taco—there’s good reason to believe it was at the very least brought on by a suddenly crowded world of fast food breakfasts. The US breakfast business at fast food chains, which also includes Burger King, Dunkin’ Donuts, and others, has ballooned into a $50-billion behemoth. And boosting morning-time sales in Europe has become a point of emphasis, too. Expect McDonald’s to talk a lot about its breakfast strategy both today and going forward. And don’t be surprised if it makes a bold announcement—like, say, all-day breakfast, or, at the very least, an extension of its current 10:30am breakfast cut-off.

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