Victor Jung

CEO, V Global Holdings

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McDonald’s Profit Edges Lower

April 22, 2014 by Victor Jung

Excerpt from Wall Street Journal
The burger giant has been struggling to maintain relevance among younger consumers and fill orders quickly in kitchens that have grown overwhelmed with menu items. AP
McDonald’s Corp. MCD +0.11% said its profit for the first three months of the year dropped 5.2% as the fast-food giant worked to revive its U.S. sales growth following a challenging 2013.

The results missed expectations.

Chief Executive Don Thompson has suggested that the company has lost relevance with some customers and needs to strengthen its menu offerings. He emphasized Tuesday that McDonald’s is focused on stabilizing key markets, including the U.S., Germany, Australia and Japan.

Comparable sales at U.S. restaurants open more than a year declined 1.7% for the quarter and 0.6% for March, the fifth straight month of declines.

The company pointed to weaker guest traffic amid challenging industry dynamics and severe winter weather. It also reiterated its commitment to improving U.S. results, in part through customer engagement and menu choices.

Global comparable sales edged up 0.5% for both the quarter and month, helped by higher average checks, despite weaker guest traffic in several key markets.

Looking to April, Mr. Thompson said global comparable sales are expected to be modestly positive.

Franchisees and executives have said the McDonald’s menu has become overly complicated, with the addition of more new items slowing service and turning off customers. Despite struggles in 2013, Mr. Thompson recently said he expects improvement this year.

Overall, McDonald’s reported a first-quarter profit of $1.2 billion, or $1.21 a share, down from $1.27 billion, or $1.26 a share, a year earlier. The company partly attributed the decline to the impact of prior-year income tax benefits.

Total revenue for the quarter edged up 1.4% to $6.7 billion, though costs rose faster, at 2.3%.

Analysts polled by Thomson Reuters forecast earnings of $1.24 a share on revenue of $6.72 billion.

In Europe, same-store sales grew 1.4%, as positive sales performance in the U.K., France and Russia was partially offset by ongoing weakness in Germany.

The Asia/Pacific, Middle East and Africa region’s same-store sales edged up 0.8%, reflecting strength in China offsetting weakness in Japan.

Write to Ben Fox Rubin at ben.rubin@wsj.com

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Filed Under: CEO Roundtable, Economy, Financial, Victor Jung

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