McDonald's says a key sales figure fell 2.5 percent in July, dragged down by persistent weakness in the U.S. and the impact of a food safety scandal in China.
The world's biggest hamburger chain says the global decline included a 3.2 percent drop in the U.S. and a 7.3 percent drop in the unit encompassing Asia, the Middle East and Africa. Its China division took a major hit in late July when a TV report showed workers at one of its suppliers repacking expired meat. Many McDonald's restaurants in the country were left without beef and chicken supplies as a result.
Even as McDonald's restaurants get back to serving the full menu, sales are likely to continue suffering given the sensitivities around food safety in China. Yum Brands, which owns KFC and Pizza Hut, says it did not rely as heavily on the supplier in question. But it has nevertheless been ensnared in the scandal as well and has seen its sales drop significantly.
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McDonald's Corp., which has more than 35,000 locations around the world, has warned that the scandal put its global sales forecast for the year "at risk." The company had previously said it expects sales to be relatively flat.
Back in the U.S., McDonald's has been unable to boost sales amid heightening competition and shifting eating habits. Chains like Chipotle, for instance, are gaining favor by touting more wholesome ingredients and the ability to customize food. McDonald's CEO Don Thompson has also noted that the lower-income customers that tend to go to McDonald's are struggling more financially, making it more difficult to get them to spend money on eating out.
Thompson has also said the company complicated its menu and slowed down service by introducing too many items too quickly. He said the company is working on getting the basics rights — such as improving service.
The one bright spot in July was Europe, where sales at established locations edged up 0.5 percent.
McDonald's shares slipped 65 cents to $92.66 premarket trading Friday.