McDonald’s: The First Step is Admitting You Have a Problem

McDonald’s (MCD) has a problem. Investors have known this for a while, and now it seems McDonald’s management does too.

Associated Press

McDonald’s reported a profit of $1.35 a share not including charges, missing forecasts for $1.37. Even worse–same-store sales in the U.S. and Europe slumped the most since 2003. Janney’s Mark Kalinowski and Ryan Kidd explain:

September same-store sales in the U.S. fell by -4.1%, which was even worse than our sell-side low projection of -3.6% (and also below the Consensus Metrix figure of -2.8%).

The -4.1% number was also the worst monthly McDonald's U.S. same-store sales performance since February 2003's -4.4%. Perhaps an even greater surprise was Europe's September same-store sales decline of -4.2%, which was worse than our -1.0% projection, and below the Consensus Metrix number of -0.9%. The poor European showing was the worst month for McDonald's same-store sales in that key region since March 2003's -5.4% decline. Although APMEA (Asia/Pacific, Middle East, & Africa) September same-store sales of -7.5% were better than our -11.0% estimate and Consensus Metrix of -11.0%, it's obviously not a performance to crow about, either.

The good news is that McDonald’s finally acknowledged that it has a problem. It plans to simplify its menu, among other steps. It might take bigger steps, however, before investors can start believing in McDonald’s again.

Shares of McDonald’s have dipped 0.3% to $91.35 at 12:28 p.m.