McDonald’s Q2 profit falls, shares slide
NEW YORK, July 23 – McDonald’s Corp reported lower-than-expected quarterly profit today, hurt by a slowing global economy and the impact of a stronger dollar, and said sales growth at established restaurants would slow this month.
Shares fell 3 per cent to US$88.81 (RM281.74) after the world’s largest fast-food chain operator said higher costs and the drag from the US dollar conspired with softening consumer demand to hurt business.
The McDonald’s results came days after Chipotle Mexican Grill Inc surprised investors by saying the sluggish US economy had cooled same-restaurant sales growth, adding to concerns about how much consumers were cutting back on discretionary spending.
“We knew it was going to be a tough quarter going in, and it certainly was,” Edward Jones analyst Jack Russo said.
“This year is going to be a challenge for the chain. Europe (its biggest market for sales) has slowed down, and the consumer remains pretty frugal,” Russo said.
“What we don’t know is were they more aggressive in terms of discounting to get customers,” he said.
McDonald’s net income fell to US$1.35 billion, or US$1.32 per share, during the second quarter, from US$1.41 billion, or US$1.35 per share, a year earlier. The impact of the stronger dollar – which lessens the value of sales overseas for US companies – cut 7 cents a share from earnings in the latest quarter, the company said.
Analysts, on average, looked for US$1.37 a share, according to Thomson Reuters I/B/E/S.
Sales edged up to US$6.92 billion from US$6.91 billion a year earlier.
Sales at restaurants open at least 13 months were up 3.7 per cent in the quarter, exceeding the 2.9 per cent increase expected by analysts polled by Consensus Metrix, but down from a 5.6 per cent increase in June.
Comparable sales growth slowed even more in June – to 4.4 from a 7.7 per cent rise a year ago.
“You are starting to see signs that consumers are spending less at restaurants,” said Morningstar analyst R.J. Hottovy. “You are also seeing increased competition.”
The company said it expects same-restaurant sales to rise in July, but less than they did in the second quarter.
Same-restaurant sales rose 3.6 per cent in the United States and 3.8 per cent in Europe in the quarter. Analysts expected gains of 3.5 per cent in the US and 2.4 per cent for Europe.
Comparable sales rose 0.9 per cent in the Asia/Pacific, Middle East and Africa region, hurt by weakness in Japan. Analysts expected a 0.8 per cent increase in that region. – Reuters
