October was the month that McDonald's (NYSE:MCD) should have turned things around, but it wasn't to be. The world's largest burger chain posted another month of negative comparable-restaurant sales.
McDonald's stock opened higher on Monday after reporting its initial sales performance for the month of October. Global comps slipped 0.5%, despite seeing its three key markets -- the U.S., Europe, and the Asia/Pacific, Middle East and Africa region -- all fall harder than that. Strength in Canada and Latin America helped offset some of those declines.
The market welcomed the news at first. Wall Street was bracing for a 2% hit given the chain's deteriorating state on its home turf and the Chinese supplier scare that has rocked sales in Asia in recent months. However, it's hard to applaud the 1% decline in same-restaurant sales that the Big Mac daddy posted in October.
McDonald's is still a mess closer to home, and it shouldn't be. October had the potential to be a turning point or at the very least a temporary break from the negative store trends. Between the four-week Monopoly promotion that wasn't around in October of last year and the regional rollout of the McRib later in the month, last month had some favorable tailwinds. Apparently the public's diminishing perception of McDonald's as a dining destination proved to be too much of a headwind.
McDonald's version 2.0
Mickey D's knows that it's out of favor. It announced on Monday morning that it will be revamping its marketing approach, simplifying its increasingly bloated menu, and introducing a new organizational structure.
However, McDonald's is also saying that it's making an effort to provide more customizable food options, creating a more inviting atmosphere, and embracing technology to provide additional ways to order and pay for food. The goals don't seem compatible. How can you offer more customized options while still simplifying the menu? Won't the wider customization lead to more orders being made incorrectly, slowing down the process? How do you pinpoint a marketing strategy when you're trying to push mobile pre-ordering, tablet menus, and restaurant makeovers?
McDonald's isn't in an easy place. It has now posted negative comps in 11 of the past 12 months at its stateside eateries, and that has naturally resulted in four consecutive quarters of declining same-restaurant sales. A soft October now makes it seem like stretching that streak to five quarters is the smart bet.
It can't point to the industry being in a funk. Its two largest rivals -- Burger King Worldwide (UNKNOWN:BKW.DL) and Wendy's (NASDAQ:WEN) -- reported quarterly results last week. They were solid. Burger King and Wendy's came through with positive comps. Burger King has posted four straight quarters of positive comps, perfectly contrasting the past year of declines at McDonald's.
If there's any sliver lining for McDonald's investors, it's that this month it starts pitting itself against last November's decline in comps. The comparisons will get easier in the coming 12 months outside of the flat April that stands out as the only month over the past year that didn't feature declining comparable-restaurant sales. November could also have a bit of a boost from the tail end of the Monopoly promotion and the subsequent food prize redemptions.
The market will have to see something out of McDonald's in November. The past year has been brutal, watching the chain slump as most burger flippers are taking baby steps in the right direction.