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McDonald's fails consumer taste test

Monday, December 08, 2014 - 01:54

McDonald's reported a steeper-than-expected fall in global same-restaurant sales in November- and warned of troubles in the current quarter. Bobbi Rebell reports.

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Burger bungles and a manic menu at McDonald's is killing their sales numbers. Last month they had their biggest drop in almost 15 years - back when Mad Cow disease had consumers shunning beef. Meat supplier issues. A chinese meat supplier was accused of selling expired meat- drove down sales. And for a fast food place - its menu is anything but- its now got about 120 items on it. And worst of all, things have been heading south at Mickey D's for a couple of years now. Management is on a short least at this point, says Morningstar's R.J. Hottovy: SOUNDBITE: R.J. HOTTOVY, CONSUMER EQUITY STRATEGIST, MORNINGSTAR (ENGLISH) SAYING: "Coming at a time when a lot of the other restaurant chains are posting positive traffic grow, seeing the benefits of lower gas prices, it just shows me that this brand is really struggling to resonate with consumers, whether it be product offerings that resonate on the dollar menu whether it be catering to more of a millennial or higher end audience, it's a struggle to bring people in the doors now." McDonald's also warned margins are under pressure in the current quarter, in part because of the stronger dollar. Adding to the pain- international drama. For example, in Russia some restaurants have been shut down: possible payback for U.S. sanctions against Russia. The game plan for a comeback? Simplify the menu - but make it more customizable - kind of like rival Chipotle. SOUNDBITE: R.J. HOTTOVY, CONSUMER EQUITY STRATEGIST, MORNINGSTAR (ENGLISH) SAYING: "Management's track record for execution last couple of years in terms of menu innovation, marketing hasn't been stellar, to put it bluntly. I think that the biggest hurdle the company has right now is executing something major like this, you know, a major initiative customization. Yeah that's great in consumers minds, that usually is something that can drive traffic and create excitement for the brand, but if the company fails to execute on it and has some mis-steps with rolling it out to stores, that can also have the opposite effect where you turn off people to the brand." And that is reflected in McDonald's shares. The stock has really done nothing this year - and was down on Monday's news.

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McDonald's fails consumer taste test

Monday, December 08, 2014 - 01:54