Macdonalds Issues

All The Wrong Ingredients: McDonald's Growth Problems Reflect U.S. Competition, Consumer Woes

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Emerging markets no longer look like the promised land of fast growth for McDonald's, the world's largest restaurant chain. (Photo credit: Wikipedia)

McDonald’s profit declined in the second consecutive quarter, the first time in more than three years that the world’s largest restaurant chain experienced such a fall. This turn of events for McDonald’s, once praised for its ability to grow in times and in places where others could not, reflects growing competition in the U.S. fast-food market and the poor health of the consumer worldwide.

McDonald’s indeed faces “challenging conditions,” says new CEO Don Thompson. Looking ahead, Thompson says, both profits and sales should remain limited. More worrying still: “As we begin the fourth quarter,” Thompson says, “October’s global comparable sales are currently trending negative.”

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McDonald’s made $1.45 billion, $1.43 a share, in the third quarter, down from $1.5 billion, $1.45 a share, last year. Analysts had expected net income of $1.47 a share.

While sales growth slipped in October, it was still present throughout the third quarter. Sales at established locations rose 1.9% worldwide. This is a key metric for chain companies because it strips away the volatility from newly opened or closed locations.

Revenue was $7.2 billion, a 0.2% decline from a year earlier.

Shares of McDonald’s fell 3.4% to $89.70 in early morning trading. McDonald’s competes with chiefly with Burger King and Wendy’s, while facing renewed pressure from Yum! Brands and newer rivals like fast-casual chain Chipotle...