McDonald's looks to customer engagement to boost sales following dismal quarter

McDonald's (NYSE:MCD) will focus capital investments, new technology and expanding mobile capabilities following dismal first-quarter earnings. 

The restaurant chain's sales suffered due to growing competition from fast-food rivals Burger King (NYSE:BKW) and Taco Bell and a drop in customer traffic.

McDonald's said fewer customers made trips to its restaurants during the quarter, which has been tough for retailers overall due to an unusually harsh winter. For McDonald's, however, the drop could reflect a change in consumer eating habits towards healthier fare, especially considering that Chipotle last week reported same-store sales increased by 13.4 percent. After a decade of growth, annual sales at U.S. McDonald's locations open at least one year fell for the first time last year.

Growing competition in the fast-food arena may have also had an impact on sluggish sales. Burger King has been introducing $1 sandwiches and last fall brought back its "Big King" sandwich, which looks very similar to the Big Mac made by its rival. Taco Bell on March 27 also began selling breakfast items, such as sausage burritos and Cinnabon bites. April would reflect the first full month that Taco Bell has offered its national breakfast menu.

McDonald's, the world's largest restaurant chain, reported that its net income fell 5.1 percent to $1.2 billion from $1.27 billion a year earlier. While revenue edged up by 1 percent, same-store sales fell 2 percent and operating income declined 3 percent during the quarter.

Looking ahead, the hamburger chain said the U.S. remains focused on improving sales by adding more investments in restaurant capabilities and modernization and customer engagement, said CEO Don Thompson in a statement. Last month, McDonald's said it was planning to expand a test this year that lets people order customized burgers. The chain first rolled out the pilot in November, and now the chain will extend the concept in as many as 100 locations in Southern California.

McDonald's has also been aggressively expanding its branded mobile app. The app pushes out store-specific deals to consumers that are then redeemed in-store. The time-sensitive deals must be shown to a store employee within two minutes of clicking to redeem an offer.

For more:
-See this McDonald's earnings statement

Related stories:
McDonald's to expand build-your-own-burger test
McDonald's drops Heinz Ketchup due to executive rivalry
Burger King goes after McDonald's with the "Big King" burger
Does McDonald's give enough to Its own charity?
What is McDonald's doing wrong?