Despite increasing competition and weak economic conditions, McDonald’s (NYSE:MCD) managed to serve up a slight profit gain for the first quarter. However, shares slipped in morning trading as the overall results were a few nuggets short of a Happy Meal.
For the quarter ended March 31, 2013, the world’s largest restaurant chain earned $1.27 billion ($1.26 per share), compared to $1.266 billion ($1.23 per share) a year earlier. Revenue edged higher to $6.6 billion from $6.55 billion in the same period. Analysts were expecting earnings of $1.27 per share on revenue of $6.59 billion.
Sales appear to be going stale around the world. Global sales at restaurants open at least 13 months fell 1.0 percent. U.S. sales dropped 1.2 percent, while Europe, the company’s biggest region by sales, fell 1.1 percent. Due primarily to ongoing weakness in Japan and China, the Asia/Pacific, Middle East, and Africa region witnessed a 3.3 decline in first quarter comparable sales.
“McDonald’s remains diligently focused on enhancing our menu, restaurants and the overall customer experience to become more relevant to today’s consumers,” said McDonald’s President and CEO Don Thompson. “While the Company’s results for the quarter reflected difficult prior year comparisons and the ongoing impact of global economic headwinds, we continue our efforts to build market share and deliver sustained profitable growth for all stakeholders.”
An industry slowdown…
Wallets have been on a strict diet in recent months. According to the latest reading from the Knapp-Track Index of monthly restaurant sales, American casual-dining revenue dropped 5.4 percent in February, after declining in January and December. This is the first three-month losing streak for restaurants since 2010.
Malcolm Knapp, the creator of the index, tells Bloomberg, “February was pretty ugly” for many chains. In fact, it will probably be the worst month of the year since payroll taxes and health-care premiums hit paychecks. Additionally, rising gasoline prices weighed on consumers. Knapp adds that even weather played a role. “It’s important to keep in mind that companies also are facing unusually tough comparable sales because of favorable weather in 2012.”
In October, McDonald’s announced its first monthly sales decline in more than nine years. Global comparable sales dropped 1.8 percent in October, the first monthly decline since March 2003.
Shares of McDonald’s dropped more than 2.0 percent after the first-quarter results, making it one of the worst performers in the Dow Jones Industrial Average. Shares of Yum! Brands (NYSE:YUM) also edged slightly lower, while Burger King Worldwide (NYSE:BKW) and The Wendy’s Company (NYSE:WEN) climbed higher. Shares of McDonald’s are still up more than 13 percent for the year, and the company returned $1.1 billion to shareholders in the first quarter through dividends and share repurchases.
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