McDonald's Reports Weak U.S. Sales -- Update

By Chelsey Dulaney 

McDonald's Corp. said a key sales metric fell a worse-than-expected 2% in the U.S. during the second quarter, as the promotions and featured items that the fast-food chain launched to draw in customers fell flat.

Overall for the quarter, McDonald's reported profit and revenue that fell less-than-expected.

Chief Executive Steve Easterbrook, who took the helm of the struggling burger giant in March, called the results "disappointing," but said the company is "seeing early signs of momentum."

Shares of McDonald's, virtually flat over the past three months, rose 1.5% in premarket trading.

"We have made meaningful progress since announcing the initial steps of McDonald's turnaround plan in early May," Mr. Easterbrook said in a news release.

The company added that it expects to see its sales at restaurants open at least 13 months to grow in its current quarter.

The results come as McDonald's looks to turn itself around after two years of struggles, including changing consumer tastes in America and food-safety issues in Asia.

Mr. Easterbrook has said he is working to turn McDonald's into a "modern, progressive burger company." The company has made a number of moves in recent months, including eliminating antibiotics from chicken, introducing better burgers and customizable options and emphasizing the freshness of its ingredients.

It is also considering offering all-day breakfast nationwide starting in October, The Wall Street Journal reported this week. McDonald's said Thursday that it is continuing local market tests of all-day breakfast.

But Thursday's results are the latest sign that its efforts haven't yet paid off. McDonald's said traffic was negative for all its major segments during the quarter

Meanwhile, sales at stores open at least 13 months fell 0.7% globally in the latest quarter, worse than the 0.4% analysts polled by Consensus Metrix had expected. The 2% drop in the U.S. was worse than the 1.5% drop Consensus Metrix had forecast.

McDonald's said its promotions and featured products didn't receive the customer response it had hoped for, as competition also remained an issue.

In the Asia-Pacific division, where it is struggling with perception issues after food-safety scares in China and Japan, comparable-store sales fell 4.5%, below the 3.4% decline analysts had forecast.

European sales increased 1.2%, helped by strong performances in the U.K. and Germany, thought analysts had forecast 1.5% growth.

Overall, McDonald's reported a profit of $1.2 billion, or $1.26 a share, down from $1.39 billion, or $1.40 a share, a year earlier.

Revenue slid 9.5% to $6.5 billion. Excluding currency impacts, revenue would have been up 1%.

Analysts polled By Thomson Reuters had forecast $1.23 a share in earnings and $6.45 billion in revenue.

McDonald's booked $45 million in restructuring charges related to its turnaround efforts in the quarter.

Write to Chelsey Dulaney at [e-mail]

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