McDonald’s Corporation (NYSE:MCD) came up with its July comparable sales numbers today that were way below Street expectations. Though analysts were already expecting a low number from China due to safety concerns, the whole APMEA (Asia/Pacific, Middle East and Africa) region was down by 7.3%. The comparable sales for U.S. declined by 3.2%, while global sales were down 2.5%.
R.J. Hottovy, senior analyst at Morningstar broke down worse than expected sales numbers of McDonald’s Corporation (NYSE:MCD) and how this will impact the company and its CEO in the future, on CNBC.
“I think it was a lot worse, really on two fronts. We knew the news from China and the APMEA region was going to be bad, but to see a negative 7.3, really gave us the first clear picture of how serious this issue is. That’s probably going to put the company in negative double digit comp territory over the next couple of quarters because this only kicked down on the last 10 days of the month. So, that becomes a concern not only on the top-line, but also on the margin-line as well, given that they have a heavier percentage of company-owned store locations there […],” Hottovy said.
Hottovy feels that the future prospects for McDonald’s Corporation (NYSE:MCD) is not looking good even in the U.S. He believes that a lot of initiatives taken by McDonald’s Corporation (NYSE:MCD) hasn’t gained traction and the company is struggling to re-connect with its customer base.
“I think you have got a situation, where the higher end, and more affluent and even the millennial customer shifted away to the fast casual players like Chipotle, Panera, Five Guys and those players like that. Whereas the low end consumer is finding alternative channels for food,” Hottovy added.
Hottovy also believes that McDonald’s Corporation (NYSE:MCD)’s CEO has taken a lot of initiatives, which haven’t panned out in a positive manner and can become a risk for the CEO himself.