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McDonald’s Profit Trails Estimates as Sales Slump Persists

Published on Jul 22 2014 2:58 PM in Restaurant

McDonald’s Profit Trails Estimates as Sales Slump Persists

McDonald’s Corp., the largest restaurant chain by sales, posted second-quarter profit that trailed analysts’ estimates after a US sales slump lingered.

Net income fell less than 1 per cent to $1.39 billion, or $1.40 a share, from $1.4 billion, or $1.38, a year earlier, the Illinois-based company said today in a statement. The average of 24 analysts’ projections compiled by Bloomberg was $1.44 a share. Revenue rose 1.4 per cent to $7.18 billion, trailing the estimate for $7.29 billion.

McDonald’s US business faces a crowded field and last year it added many new items, slowing down its kitchens. Competitors such as Yum! Brands Inc.’s Taco Bell, Wendy’s Co. and Burger King Worldwide Inc. also are selling more new fare that’s attracting Americans. McDonald’s US same-store sales fell 1.5 per cent, compared with a 1.7 per cent decline in the previous quarter. Analysts had estimated that the sales would be little changed, according to Consensus Metrix.

“They’re losing kind of a little bit of share to everybody now,” said Peter Saleh, a New York-based analyst at Telsey Advisory Group. Along with fellow fast-food burger joints, pizza and fast-casual chains may be stealing some of McDonald’s business, he said.

While McDonald’s has tried advertising free coffee, new bacon Clubhouse sandwiches and Happy Meals, the promotions have failed to boost same-store sales. Comparable-store sales are considered an indicator of a retailer’s growth because they include only established locations. June comparable-store sales fell 3.5 per cent in the US.

Meanwhile, Taco Bell’s same-store sales have improved after the company introduced breakfast items across the US in March. The Mexican-food chain also recently began selling a high-protein menu in the US.

McDonald’s has more than 35,400 restaurants worldwide and about 19 per cent are owned by the company. By 2016, the chain is seeking to franchise as many as 1,500 of its company-owned stores, primarily overseas, it said in a statement in May.

Same-store sales in McDonald’s Asia-Pacific, Middle East and Africa region rose 1.1 per cent during the quarter. Analysts estimated a 1.5 per cent increase, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group. They fell 1 per cent in Europe, where McDonald’s gets about 40 per cent of revenue. Analysts projected a 0.7 percent gain.

The hamburger chain has been selling value meals in Germany as well as family packs of McNuggets and onion rings in France to attract budget-conscious European diners.

July global same-store sales are expected to be negative, McDonald’s said in today’s statement.

Bloomberg News edited by Hospitality Ireland

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