McDonald's Falls Short on Profit -- Update
October 22 2019 - 9:52AM
Dow Jones News
By Heather Haddon
McDonald's Corp. is reaching for deals and price increases to
boost sales as the chain tries to lure more customers.
The world's biggest burger chain by revenue said same-store
sales grew 5.9% globally in the third quarter, above the 5.4%
analysts polled by FactSet were expecting. Sales in the U.S. grew
by 4.8%.
It took offerings and promotions, along with menu price
increases, to boost sales, the Chicago-based company said.
McDonald's Chief Executive Steve Easterbrook said in prepared
remarks Tuesday that renovated stores are also contributing to more
sales and visits.
Earnings of $1.6 billion were down 2% from a year earlier when
accounting for currency fluctuations. The company reported earnings
per share of $2.11 and sales of $5.4 billion. Analysts polled by
FactSet expected earnings per share of $2.21 adjusting for one-time
items, and $5.5 billion in sales.
Company executives said the income miss was minimal, while they
chalked up differing ways of calculating margins to the gap with
analysts on earnings. Lower gains in sales of company-owned stores
in the U.S. contributed to the miss, McDonald's said.
Shares in the Chicago-based company fell 2% in premarket trading
to $205. Its stock was up 18% so far this year through Monday's
close.
Restaurants across the industry have increased menu prices to
help boost sales as labor and other expenses grow. Consumer prices
for food served at restaurants have grown recently by 3.2%, an
increase not seen since 2009, Labor Department data shows.
Fast-food competition continues to be intense, particularly for
burger-focused chains.
Visits to U.S. fast-food burger restaurants were down 1% in the
year ending in August, according to research firm NPD Group Inc.
That was weaker than the average for fast-food restaurants, which
saw a 1% increase during the period.
McDonald's has been fighting for years to boost customer visits.
Customer transactions continued to be flat in the quarter ending in
September.
"Traffic is still negative. For me as president of the U.S.,
it's not satisfactory," said McDonald's USA President Chris
Kempczinski at The Wall Street Journal Global Food Forum in New
York earlier this month.
Mr. Kempczinski pointed to competitors adding more locations and
demographic shifts in the U.S. as weighing on customer visits for
McDonald's. An aging population has resulted in more Americans
eating at home generally, analysts say.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
October 22, 2019 09:37 ET (13:37 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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