McDonald's losses reflect nation's changing tastes
Fri Jan 24, 7:13 AM ET Add Top Stories - USA TODAY to My Yahoo!
Bruce Horovitz USA TODAY
McDonald's reported its first-ever quarterly loss Thursday, signaling a national decline in appetite for burgers, fries and plastic seats.
After steady growth for decades, the company often credited with turning America into a nation of fast-food fanatics lost $344 million during the last three months of 2002. Much of the loss was linked to the high costs of closing restaurants that had lackluster sales.
McDonald's annual results weren't much better. Its domestic sales at restaurants that were open at least one year, considered a reliable business gauge, fell 1.5% for the year. The burger giant says it expects to close 719 poorly performing restaurants, mostly in the USA. Though the company's problems aren't limited to this country, that's where 37% of its annual revenue comes from and where 45% of its stores are located.
The bad quarterly news was expected, but McDonald's stock still fell Thursday. After dipping below $15 a share for the first time in eight years, it closed at $15, down 36 cents.
McDonald's isn't the only fast-foodie ailing. Much of the $110 billion industry is in the doldrums as an aging population turns away from bargain meals in paper sacks and toward more upscale quick meals that make folks feel good about the food, the experience and themselves.
''McDonald's needs to reinvent itself,'' says Matthew DiFrisco, analyst at Gerard Klauer Mattison. ''Consumer behavior has moved to grazing for a snack at a Starbucks or Panera Bread and not ordering a meal at McDonald's.''
But Jim Cantalupo, who has been CEO for 23 days, told analysts in a conference call on Thursday that he has no plans to reinvent McDonald's. His near-term plan: Improve service, keep food hot and clean up the restaurants.
''The experience we deliver has eroded,'' he says. ''If we can just get the customers we've lost back in the stores, our financial picture would be dramatically different.''
That is precisely what McDonald's needs to do, consultant Pam Murtaugh says. ''The bedrock of McDonald's used to be pride,'' she says. ''But that is broken since McDonald's stopped respecting itself.''
By the end of March, Cantalupo says he plans to spell out details of the company's turnaround plans. That's also when McDonald's expects to roll out a national line of nutritional salads that industry experts say are modeled after Wendy's brisk-selling salad lineup.
Cantalupo and other officials alluded to other possible changes down the line:
* The Big 'N Tasty burger may not be a longtimer on the Dollar Menu because it is eroding sales of pricier burgers such as the Big Mac.
* A costly new cooking system will probably need to be modified to speed service.
* Consideration is being given to selling a few items from the company's other restaurant brands, such as the popular burritos from Chipotle.
* By summer, the company will introduce the McGriddle Sandwich, a breakfast item that stuffs egg and cheese between two pancakes. No gloppy mess: The syrup's baked in. |
