Batesville Herald Tribune, Batesville, Indiana

Community News Network

July 22, 2013

McDonald's falls as 2nd-quarter profit trails estimates

CHICAGO — McDonald's fell the most in nine months after posting second-quarter profit and revenue that trailed analysts' estimates and saying economic weakness would hurt results for the remainder of the year.

McDonald's slid 2.7 percent to $97.53 at 11:37 a.m. in New York after falling 3.2 percent for the biggest intraday drop since Oct. 19. The Oak Brook, Ill.-based company's shares had gained 14 percent this year through July 19, while the Standard & Poor's 500 Restaurants Index rose 17 percent.

Chief Executive Officer Donald Thompson has been trying to attract consumers with less expensive fare, such as Dollar Menu foods in the U.S. and combo meals in Europe. Sales at global stores open at least 13 months rose 1 percent in the quarter, matching the average estimate of analysts surveyed by Consensus Metrix.

"There are folks for whom it's an economic decision to go to McDonald's, and they're not going," Bryan Elliott, an Atlanta-based analyst at Raymond James Financial Inc., said in an interview. "We need to see a meaningful rise in purchasing power" among McDonald's customers, he said.

July same-store sales are projected to be unchanged from last year, Thompson said Monday in a statement. "Based on recent sales trends, our results for the remainder of the year are expected to remain challenged," he said.

Net income rose 3.7 percent to $1.4 billion, or $1.38 a share, from $1.35 billion, or $1.32, a year earlier, the company said. Foreign currency exchange-rate fluctuations reduced profit by 2 cents a share in the quarter. Analysts estimated $1.40 a share, the average of 27 projections compiled by Bloomberg.

"Several currencies weakened against the U.S. dollar during the quarter," Chief Financial Officer Peter Bensen said during a conference call today. Currency translation will negatively affect 2013 profit by 7 cents to 9 cents a share, he said.

The U.S. Dollar Index, which IntercontinentalExchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, gained 3.6 percent this year through July 19.

Revenue rose 2.4 percent to $7.08 billion in the quarter, trailing analysts' average estimate of $7.09 billion.

Same-store sales rose 1 percent in the U.S., lagging behind estimates for a 1.5 percent gain, according to Consensus Metrix, a researcher owned by Wayne, N.J.-based Kaul Advisory Group.

McDonald's has faced a U.S. consumer environment where unemployment has been stuck above 7.5 percent for 54 straight months. Competitors also are introducing new items - Burger King Worldwide has smoothies and soft-serve ice cream, while Yum Brands' Taco Bell is testing a $1 menu.

During the past month, McDonald's has increased advertising for its value items to drive more customers into restaurants, Peter Saleh, a New York-based analyst at Telsey Advisory Group, said Monday in an interview. The consumer environment is volatile in the U.S., he said.

"There's no good footing," Saleh said.

Comparable-store sales declined 0.1 percent in Europe and 0.3 percent in the company's Asia Pacific, the Middle East and Africa region, during the quarter. Analysts estimated drops of 0.1 percent and 0.2 percent, respectively. Same-store sales are an indicator of a company's growth because they include only older restaurants.

In Europe, McDonald's is facing a cash-strapped consumer. The Big Mac seller this year has been promoting less expensive items, such as combo meals and 1 euro burgers, in Germany and France, the company's two biggest European markets. The fast- food chain gets about one-third of its revenue from countries in its Europe segment.

McDonald's has about 34,500 stores globally, of which 19 percent are owned by the company.

 

1
Text Only
Community News Network
Featured Ads
AP Video
Arizona Prison Chief: Execution Wasn't Botched Calif. Police Investigate Peacock Shooting Death Raw: Protesters, Soldiers Clash in West Bank Police: Doctor Who Shot Gunman 'Saved Lives' 'Modern Family' Star on Gay Athletes Coming Out MN Twins Debut Beer Vending Machine DA: Pa. Doctor Fired Back at Hospital Gunman Raw: Iowa Police Dash Cam Shows Wild Chase Obama Seeks Limits on US Company Mergers Abroad Large Family to Share NJ Lottery Winnings U.S. Flights to Israel Resume After Ban Lifted Official: Air Algerie Flight 'probably Crashed' TSA Administrator on Politics and Flight Bans Raw: National Guard Helps Battle WA Wildfires Raw: Ukraine's Donetsk Residents Flee Senators Push to End Hamas Threat in Cease-Fire A Young Victim's Premonition, Hug Before MH17 Raw: Deadly Storm Hits Virginia Campground Death Penalty Expert: 'This is a Turning Point' Raw: MH17 Victim's Bodies Arrive in Netherlands
Seasonal Content
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Facebook