A supplier scandal in China and weak sales in the U.S. slammed quarterly profit. McDonald's doesn't see a quick turnaround. Fred Katayama reports.
McDonald's just can't get a break today. Its quarterly profit plunged 30 percent. So many things hurt its bottom line around the world, from a supplier scandal that slammed sales in China and Japan, to store closures in Russia amid charges of sanitation violations. And the rising dollar and higher taxes also bit into earnings. But the damage isn't limited overseas. Comparable sales fell more than three percent in its biggest market, the U.S. A big structural problem is robbing it of sales. Younger people keep flocking to healthier fast casual restaurants like Chipotle for fresh food. Even Chipotle, which reported stellar earnings, warned that its sales could slow down next year. Mickey D's has company. Coca-Cola's profit fell because of the strong currency and weak demand for its sugary sodas. McDonald's doesn't see any quick turnaround. It said it expects pressures on performance to persist given competition and rising costs in the U.S., the difficulty of predicting the pace of recovery from the supplier issue, and instability in Europe. Gordon Haskett analyst Don Bilson said, "Given the company's recent results, we have no doubt there is plenty of frustration here, which makes McDonald's fertile ground for activism." McDonald's shares, which are down nearly 6 percent this year, fell further at the open. It's vastly underperforming the shares of Chipotle and archrival Burger King, which is buying the Canadian donut chain, Tim Hortons.