Wednesday 21 March 2018

McDonald's predicts drop in sales as competition takes a bite

Lisa Baertlein

McDonald's yesterday forecast a decline in global restaurant sales for January, as it and other fast-food chains fight for customers who are spending cautiously during continued economic uncertainty.

The world's biggest restaurant company by revenue also reported an unexpected rise in December sales at established US restaurants, which helped lift its fourth-quarter profit above analysts' estimates.

Wall Street expected the early part of 2013 to be tough for McDonald's as it runs short of quick-fixes for its business in the United States and bumps up against strong year-earlier results that were bolstered by unseasonably warm weather.

Global same-restaurant sales were flat in December, helped by an unexpected 0.9pc rise in the US – its second-largest market behind Europe.

The company's push to keep more restaurants open on Christmas Day and its shift of the limited-time offering of its popular McRib sandwich to December from October bolstered the December US results.

McDonald's expects near-term top and bottom-line growth to remain pressured in part because the company must top strong results from a year ago, chief executive Don Thompson said.

Global sales

Last year's global sales at McDonald's restaurants open at least 13 months increased 6.7pc for January and 7.3pc for the first quarter.

Fast-food chains like Burger King and Taco Bell have introduced new US menus and are doing a better job of competing.

At the same time, US consumers have less money in their pockets since the end of the payroll tax cut.

"We suspect choppy demand trends and the impact of the loss of the payroll tax deduction (in the United States) are in part to blame" for the company's downbeat guidance, Lazard Capital Markets analyst Matthew DiFrisco said.

Fourth-quarter net income at the world's biggest restaurant chain rose 1.4pc to $1.40bn (€105), or $1.38 per share. That topped analysts' average forecast of $1.33 a share, according to Thomson Reuters. Total sales rose 1.9pc to $6.95bn.

Shares in the company shares were up 0.1 pc to $92.82 in early trading on the New York Stock Exchange.

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business