McDonald's sales miss as fewer customers visit its restaurants

Weak demand and competition from Wendy's and Burger King having effect on restaurant's numbers

Published: January 23 2014 | 11:34 am - Updated: 29 March 2014 | 2:33 am in
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(Reuters) - McDonald's Corp reported weaker-than-expected quarterly revenue as fewer customers visited its restaurants, in part due to a severe winter in the United States.

The world's biggest restaurant chain by revenue has posted disappointing sales for five straight quarters, hurt by weak demand and intense competition from rivals such as Wendy's Co and Burger King Worldwide Inc.

McDonald's, known for its golden arches, has roughly seven times the sales of Wendy's and Burger King combined. But it has been slower than these rivals in tempting diners with limited-time specials and promotions.

The company had signaled in October that weakness in its same-restaurant sales would continue in the fourth quarter amid stiff competition and a lackluster economic recovery.

"As we begin 2014, global comparable sales for the month of January are expected to be relatively flat," Chief Executive Don Thompson said in a statement on Thursday.

The forecast, however, encouraged Edward Jones analyst Jack Russo. "Flat, given the weather and other issues, almost looks like a victory," Russo said.

Efforts by Thompson in the roughly 18 months since he took the top job — such as tweaking menus and changing management — have not borne fruit, raising concern that McDonald's woes are due to internal rather than external factors.

New menu items, in particular lattes, smoothies, salads and wraps, have slowed McDonald's service in a business where hyper-competitive drive-thru times are measured in seconds.

McDonald's switched its value-oriented "Dollar Menu" to the "Dollar Menu & More" in November with slightly higher prices. But the program didn't draw customers despite heavy marketing.

The fast-food chain reported a 0.1 percent decline in global sales at restaurants open for at least 13 months in the fourth quarter ended December 31, due to "negative comparable guest counts."

Comparable sales in the United States fell a higher-than-expected 1.4 percent. Analysts polled by Consensus Metrix had expected a decline of 0.2 percent.

Net income for McDonald's was $1.40 billion, or $1.40 per share in the fourth quarter, compared with $1.40 billion, or $1.38 per share, a year earlier.

Total revenue for the company, known for its crispy french fries and Big Mac hamburgers, grew 2 percent to $7.09 billion.

Analysts on average were expecting the company to earn $1.39 per share on revenue of $7.11 billion, according to Thomson Reuters I/B/E/S.

Same-restaurant sales in Europe rose 1 percent, helped by a strong performance in the United Kingdom, Russia and France. But it fell 2.4 percent in Asia Pacific, Middle East and Africa (APMEA), hurt by continued weakness in Japan.

Analysts polled by Consensus Metrix had expected a 1.1 percent rise in Europe and a 1.3 percent fall in APMEA.

McDonald's shares were down 0.5 percent at $94.40 on the New York Stock Exchange in early trading on Thursday.

The stock gained 7 percent up to Wednesday's close since Thompson became CEO. That compares with the 27 percent jump for the Dow Jones Industrial Average, of which McDonald's is a component.

(Reporting by Siddharth Cavale in Bangalore and Lisa Baertlein in Los Angeles; Editing by Joyjeet Das)

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