Home Technology McDonald’s Warns Supplier Scandal Hurts 3Q Results; Shares Tank

McDonald’s Warns Supplier Scandal Hurts 3Q Results; Shares Tank

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The shares of McDonald’s Corporation (NYSE:MCD) are trading lower after reporting its global comparable sales performance for the month of August and issued a warning that the supplier scandal in China negatively impacted its third-quarter financial results.

The stock price of McDonald’s Corporation (NYSE:MCD) is down by nearly 1% to $91.75 per share at the time of this writing around 11:55 A.M. in New York.

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McDonald’s August sales

McDonald’s Corporation (NYSE:MCD) reported that its global comparable sales dropped 3.7% in August. Its system wide sales declined 2.9% or 1.3% in constant currencies.

According to the world’s largest restaurant chain operator, its comparable sales in the United States declined 2.8% amid continuing broad-based challenges such the strong competition in the market and the sluggish growth of the industry.


McDonald’s Corporation (NYSE:MCD) said it was addressing its service, value and menu opportunities to enhance customer value and relevance in the United States. The company anticipated that soft top-line results could pressure its U.S. margin performance in the third-quarter.

In Europe, the restaurant chain operator’s comparable sales declined 0.7% last month. According to the company its performance in the United Kingdom was positive, but it was offset by its sales in Russia.

The sales of McDonald’s Corporation (NYSE:MCD) in the European region were supported by premium beef and chicken offerings along with the ongoing expansion of the breakfast and blended ice beverages. The company expected that the weak consumer sentiment would impact its sales and profitability for the third-quarter particularly in company-operated markets.

In the APMEA region, McDonald’s Corporation (NYSE:MCD) said its comparable sales fell 14.5% primarily due to the supplier scandal in China. The issue significantly impacted its results in the country, Japan and certain markets in the region.

The restaurant chain operator emphasized that it was in the process of undertaking recovery strategies to restore customer trust and confidence and continuing to pursue value, convenience and menu initiatives that differentiate the McDonald’s experience.

McDonald’s CEO comment

Don Thompson, CEO of McDonald’s Corporation (NYSE:MCD) said the company’s global business was confronted by several headwinds that impacted its sales performance in August.

“As a system, we are diligently working to navigate the current market conditions effectively to regain momentum.  For the long term, we remain focused on strengthening the key foundational elements of our service, operations and marketing to maximize the impact of our strategic growth priorities for our customers and our business,” said Thompson.

Estimated impact of China supplier scandal

McDonald’s Corporation (NYSE:MCD) estimated that the supplier scandal in China will negatively impact its third-quarter results by approximately $0.15 to $0.20 per share.

According to the company, the estimated negative impact was due to a combination of lost sales, expenses associated with recovery efforts and the impact of those items in its third-quarter tax rate (expected to be higher than its full-year tax rate outlook of 31% to 33%).

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