McDonald’s has fallen on hard times after missteps by former CEO Don Thompson and a highly competitive fast food market continued to adapt. As Thompson officially stepped down from his CEO post on February 28, the new CEO, Steve Easterbrook, finds himself with a disastrous February sales report. McDonald’s reported this morning that US sales for the month of February fell -4%. International sales fell -1.7%. Analysts believed US sales would be down only -0.7% and international sales were expected to be -0.3%.
McDonald’s won’t serve chicken with human antibiotics anymore
McDonald’s Corporation went out on another public relations mission when it announced that it would stop serving chicken that had been treated with human antibiotics. While this is good and certainly hits a note for consumers, McDonald’s is one of the largest buyers of chicken in the US and it would take a lot of money for already thin-margin producers to raise the chickens under the new rules. It is likely that the restaurant chain could get some resistance from these producers as their costs increase. However, with this announcement only days old, there still are likely to be further developments in the coming weeks.
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McDonald’s has a serious problem in Asia
If you thought US sales dropping -4% was bad for February, think again. McDonald’s saw February sales fall -4.4% in its Asia region stores, after January sales fell -13% during January. Japan specifically saw sales decline -29% for McDonald’s in February. The company continues to see massive slump in Asia due to one of its suppliers falling into scandal last July. The Shanghai Husi Food Co., a supplier of McDonald’s, was found to be repackaging old meat and sending it off to McDonald’s restaurants. There were also some issues regarding rationing of specific food offerings such as French fries. CEO Easterbrook has quite a bit of work that needs to be done in its Asian locations to stop this continued bleeding.
Overall, McDonald’s is struggling severely thanks to underperformance in the US and Asia. McDonald’s has not been very competitive against its rivals in the US, as other fast food chains continue to innovate and create new menu items, while McDonald’s continues to stay put. Asian stores continue to face health stigmas and it will likely be awhile before the company’s Asian stores are back up and growing.