This week, McDonald’s posted its earnings for the month that just ended. The results were under the mark Wall Street analysts were hoping for, but McDonald’s argues its revenue strategies were undermined by the challenges of the European markets. In other words, February’s disappointing results have been blamed on Europe.
For McDonald’s it’s not the ever aggressive competition in the fast food industry, neither the fact that people have started to reconsider the choices when it comes to their nutrition. What managers for this company see is that European markets are bringing revenues down because the region is still challenged by debt crisis and low consumer confidence.
The earnings report McDonald’s published this Thursday took some analysts by surprise. Take for instance analyst Dave Kolpak with Victory Capital Management. His statement for Reuters reads: “I was not expecting to read that sentence in this report. We’ve gotten used to being blown away with upside surprises” in McDonald’s monthly reports.
The sentence Dave Kolpak was referring to is part of the fast food’s press release that accompanied the data for February’s sales. It reads that sales were affected by the challenging winter, the financial debt and volatility in markets across Europe and to some extent by United States’ raising costs for food and labor.
As McDonald’s pointed out “severe winter weather in certain markets negatively impacted the segment’s overall February results”. And the European harsh winter is only to be added down the line to the negative effects of the austerity measures governments in the region are still struggling to implement.
“These challenges are expected to impact the company’s first quarter operating income growth” read the statement. And so did investors, as markets brought down company’s shares three percent.
Although McDonald’s report gives a gloomy outlook regarding the European market, the numbers aren’t as detrimental. In fact, throughout Europe, monthly sales at McDonald’s restaurants did boost up 4 percent. U.S. February sales rose 11.1 percent, and even if it was a slower increase, Asia, Pacific, Middle East and Africa regions brought a 2.4 percent growth.
However, Peter Saleh, analyst with Telsey Advisory Group, points out that McDonald’s disappointing February sales might be an accurate indication of the Today’s global economy. He said: “It gives people a little bit of pause that maybe the U.S. is OK, but the rest of the world is not”.