UPDATE 4-McDonald's says January restaurant sales will fall

Wed Jan 23, 2013 2:27pm EST

* Strong year-ago results, weak global economies a challenge

* Fourth-quarter results top expectations, U.S. helps

* Shares up 60 cents

By Lisa Baertlein

Jan 23 (Reuters) - McDonald's Corp on Wednesday 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 U.S. outlets, 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.

McDonald's forecast for a decline in this month's global same-restaurant sales suggests a "pretty clear drop off between December (2012) and January (2013)," Morningstar analyst R.J. Hottovy said.

Global same-restaurant sales were flat in December, aided by an unexpected 0.9 percent rise in the United States - its second-largest market for revenue behind Europe.

The company's push to keep more restaurants open on Christmas Day and its shift of the limited-time offering of the popular McRib sandwich to December from October bolstered the December U.S. results. Analysts polled by Consensus Metrix had expected those sales to drop 1.78 percent.

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 on a conference call with analysts.

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

Fast-food chains like Burger King Worldwide Inc and Yum Brands Inc's Taco Bell have introduced new U.S. menus and are doing a better job of competing with McDonald's.

At the same time, U.S. 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 in a client note.

And, in what could signal a troubling "trade-out" trend for restaurants in 2013, U.S. consumers last month made their biggest spending shift from restaurants to grocery stores since August 2011, ITG Investment Research analyst Steve West said.

Fourth-quarter net income at the world's biggest restaurant chain rose 1.4 percent to $1.40 billion, or $1.38 per share. That topped analysts' average forecast of $1.33 a share, according to Thomson Reuters I/B/E/S.

Total sales rose 1.9 percent to $6.95 billion.

To continue to remain competitive, McDonald's doubled down on promoting its value menus - such as the U.S. Dollar Menu. That effort has pressured profitability, raising concern among analysts.

The company's shares gained 60 cents, or 0.62 percent, to $93.54 in afternoon trading on the New York Stock Exchange.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
sjbtx wrote:
Their sales were up because they raised prices. Now people have decided that 7 bucks is too much to spend on a big mac “value meal”.

Jan 23, 2013 3:29pm EST  --  Report as abuse
LynCe wrote:
McDonald’s really ought to introduce a few vegetarian entrĂ©es in select markets.

Jan 23, 2013 3:42pm EST  --  Report as abuse
Mc Donalds is responsible for dumbing down workers , expecting more & giving less hours less pay & less dignity.
The Corporate McDonalds Does not care abot feeding health & well being, That new Mc rib is all reconstituted Floor scrappings from the Slaughter house, Ground up & sprayed into MC”happy “rib shapes.
The mental abuse that McDonalds commits againsts children in their Advertising is Reason enough to rejoice at seeing the profits decline, MAy the decline of this vermin trash called food be swift & steep.

Jan 23, 2013 4:33pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.