McDonald's Profit Edges Lower -- Update

By Ben Fox Rubin 

McDonald's Corp. 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.

The fast-food chain has struggled to improve sales lately, and Chief Executive Don Thompson recently said the company has lost relevance with some customers and needs to strengthen its menu offerings.

Mr. Thompson said Tuesday that the company is focused on stabilizing its key priority markets, including the U.S. Germany, Australia and Japan.

Looking to April, he said global sales at restaurants open more than a year are expected to be modestly positive.

Overall, McDonald's reported a profit of $1.2 billion, or $1.21 a share, down from $1.27 billion, or $1.26 a share, a year earlier.

Revenue improved 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.

Global sales at restaurants open more than a year rose 0.5% during the quarter, helped by higher average checks, despite weaker guest traffic in several key markets, including the U.S.

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.

Same-store sales in the U.S. fell 1.7%, which the company blamed on weaker guest traffic amid challenging industry dynamics and severe winter weather. The company reiterated its commitment to improving U.S. results, in part through customer engagement and menu choices.

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 [e-mail]

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