The New Normal For Fast Food: Price Cuts and Stagnant Sales

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By Julie Jargon
Burger sales are falling at McDonald’s, which on Wednesday reported its fourth monthly global same-store sales decline since October, when sales at restaurants open at least 13 months fell for the first time in nine years.
While not unexpected, the slight decline in April sales does not bode well for the broader fast food industry. Market research firm NPD Group Inc. last month revised its 2013 “traffic” outlook for the fast food sector to decline by 1 percent, compared with an earlier estimate of flat fast food visits.
In April, the global sales decline at McDonald’s was driven by economic weakness in Europe and Avian influenza in China, while the U.S. posted growth of 0.7%, a slight improvement from completely flat sales in March.
Analysts expected a 0.05% decline. McDonald’s credited the national introduction of “Premium McWraps,” an emphasis on cheaper menu items and its breakfast offerings for the slight improvement.
The ongoing softness at McDonald’s, a chain that beat the odds by posting growth throughout most of the recession, may indicate a new normal for the company and for the industry. NPD expects total restaurant industry traffic – of which fast food represents 78% — to be flat through 2013 and 2014.
“McDonald’s is focused on becoming our customers’ favorite place and way to eat and drink by leveraging the strength of our menu variety, unsurpassed value and convenience, and by emphasizing outstanding customer service,” McDonald’s Chief Executive Don Thompson said in the sales announcement, adding that the second quarter is starting “against the backdrop of a persistently challenging macro environment.”
Even McDonald’s has admitted that while it is trying to control the things it can – such as introducing new menu items and improving customer service – weak consumer confidence has changed the game, turning the industry into a battle for market share.