McDonald’s turns to ‘Fish McBites’ for a boost in sales

Thursday, January 24, 2013

— McDonald’s used the Dollar Menu to lift its profit in the latest quarter. Now the world’s biggest hamburger chain is turning to a pipeline of new menu items to raise slumping sales, starting with “Fish McBites.”

The Oak Brook, Ill.-based corporation is betting that it will be able to overcome intensifying competition and economic pressure with the lineup, which executives said includes new burgers, chicken entrees and breakfast offerings that are performing well in test markets. The Fish McBites, which will come in three sizes and use the same Alaskan pollock used in the Filet-O-Fish, will be added for a limited-time in February.

McDonald’s managed to eke out a higher profit for the October-to-December period with a series of short-term maneuvers, such as touting its Dollar Menu, shifting the release of its McRib from October to December and pushing franchisees to stay open on Christmas.

In November, the company ousted the president of its U.S. business after a key sales figure dropped for the first time in nearly a decade. Chief Executive Officer Don Thompson said Wednesday that the figure is expected to drop again in January.

“By no means do we think 2013 is going to be an easy year,” Thompson said in a conference call with analysts. He noted that growth in the restaurant industry has been relatively flat-to-declining around the world, with that trend expected to continue.

In addition to a more “robust” pipeline of new products, McDonald’s executives said they’ll increase sales by continuing remodeling efforts and extending store hours around the world.

Although McDonald’s said it increased its U.S. market share this past year, the chain is facing tougher competition from traditional rivals such as Burger King, Taco Bell and Wendy’s, which have been revamping their menus and posing a bigger threat. In addition, people are increasingly heading to restaurants such as Chipotle and Panera Bread. To help keep its menu fresh in the face of such competition, McDonald’s has said it plans to increase the frequency of its limited-time offerings.

For the October-to-December period, McDonald’s said same-store sales, or sales at restaurants open at least a year, rose 0.1 percent globally and 0.3 percent in the U.S. But in Europe,McDonald’s biggest market, the figure fell 0.6 percent as guest counts declined. It fell 1.7 percent in the region encompassing Asia, the Middle East and Africa.

In China, where the figure fell 0.9 percent, McDonald’s downplayed the effect of recent public concerns over its chicken suppliers. Yum Brands Inc., which owns KFC, has said it expects its sales in the region to fall 6 percent, in part because of the issue.

Same-store sales are an important measure of a restaurant chain’s performance, because they strip out the effect of newly opened and closed locations.

McDonald’s Corp. said it earned $1.4 billion, or $1.38per share, for the quarter. That compares with $1.38 billion, or $1.33 per share, a year ago.

Revenue rose to $6.95 billion, up from $6.82 billion.

The results topped expectations for profit of $1.33 per share on revenue of $6.9 billion.

In the year ahead, the company expects costs for ingredients to rise 1.5 percent to 2.5 percent. Labor costs also will continue pressuring profit margins, executives said.

Thompson, who took over as CEO this summer, said the company continues to target total sales growth of 3 percent to 5 percent over the long term. McDonald’s plans to open between 1,500 and 1,600 restaurants this year.

It currently has about 34,000.

Business, Pages 21 on 01/24/2013