Third-quarter profits at McDonald’s fall 35% as sales slow in US outlets

McDonald’s, the world’s largest restaurant chain by sales, said third-quarter profit fell 3.5% as sales growth slowed at US stores.

Net income dropped to $1.46bn (€1.12bn), or $1.43 a share, from $1.51bn, or $1.45, a year earlier, the Illinois-based company said yesterday in a statement.

Foreign-currency exchange-rate fluctuations reduced net income by 8c a share in the third quarter. Analysts projected $1.47, the average of 26 estimates.

CEO Don Thompson, who took the helm in July, has tried to draw budget- conscious Americans with a new extra-value menu. Sales at US stores open at least 13 months rose 1.2% in the quarter, the slowest growth in 11 quarters.

Analysts projected an increase of 1.7%, according to 21 estimates compiled by Consensus Metrix.

“Restaurant spending is slowing across the globe,” Bryan Elliott, an analyst at Florida-based Raymond James Financial said. In response, McDonald’s, along with its rivals, has been advertising and promoting lower-priced items more, he said.

In the US, McDonald’s saw “broad competitive activity,” said the company in the statement. McDonald’s got about 32% of its revenue from domestic stores last year. The shares fell 3.4% to $89.69 in New York and earlier slid as much as 3.5% for the biggest intraday decline since July. McDonald’s dropped 7.4% this year through to yesterday.

McDonald’s third-quarter comparable-store sales increased 1.9% globally, compared with an estimate for a gain of 2%, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group.

Same-store sales climbed 1.8% in Europe and 1.4% in McDonald’s Asia Pacific, Middle East, and Africa region, compared with estimates for growth of 1.4% and 1.8%, respectively.

The Big Mac seller, which gets 40% of revenue from Europe, said value items and remodelled stores helped boost sales in Europe. Russia, the UK, and France led the region’s same- store sales results, the company said.

Bloomberg