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McDonald’s records ‘sombre’ results

McDonald'sGlobal fast food retailer, McDonald’s, has reported a 2.7 per cent increase in global comparable sales for the final quarter of FY16, weighed down by a 1.3 per cent decrease in US comparable sales.

The figures bring McDonald’s full year global sales growth to 3.8 per cent, underpinned by a three per cent revenue slip from US$25.4 billion to US$24.6 billion.

McDonald’s cited the impact of re-franchising and comparative difficulty cycling last year’s growth base – which was driven off the back of their all day breakfast release.

“Throughout 2016, we worked diligently to lay the groundwork for our long-term future. We focused on driving changes in our menu, restaurants and technology to deliver an enhanced McDonald’s experience for our customers around the world,” said McDonald’s president and CEO Steve Easterbrook.

“We applied the necessary rigor and discipline to strengthen the Company and our financial performance. Our efforts yielded a more streamlined and focused organisation that generated solid fourth quarter and full year results, including our strongest annual global comparable sales growth since 2011.”

Neil Saunders, CEO of retail analysis firm Conlumino, said that McDonald’s full year ended on a “somber note”, putting pay to the early optimism surrounding its turnaround program.

“These changes were supposed to drive a steady and sustainable uplift in spending rather than a one-off spike in sales, but it is increasingly clear that this strategy is not delivering through,” he said.

“That McDonald’s is in such a position is doubly problematic as not only does it leave the company without a clear forward strategy of driving customer traffic, it also means the menu and service options have been made more complex – with the costs and franchisee discontent that this entails – without a compensatory uplift in sales volume. Such a position is not particularly sustainable,” he continued.

According to Saunders, widening the audience in a sustainable way is the key issue for McDonald’s as it enters its new fiscal year.

“This has to be more than about menu change – including the recent introduction of multiple sizes of Big Macs which, in our opinion, does nothing to create step change or to increase real choice,” he said. “Indeed, it is clear that the menu changes made so far have not completely reinvigorated the brand with younger and more discerning consumer segments, many of whom still shun the chain in favor of what they see as more premium offerings from other players.”

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