McDonald's says January restaurant sales will fall

Wed Jan 23, 2013 3:23pm EST

A McDonald's restaurant's drive-thru sign is pictured in Los Angeles April 4, 2011. REUTERS/Mario Anzuoni

A McDonald's restaurant's drive-thru sign is pictured in Los Angeles April 4, 2011.

Credit: Reuters/Mario Anzuoni

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(Reuters) - McDonald's Corp (MCD.N) 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 (BKW.N) and Yum Brands Inc's (YUM.N) 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.

(Additional reporting by Brad Dorfman in Chicago; Editing by Andrew Hay and Maureen Bavdek)

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Comments (2)
MyInput wrote:
It’s not about the money, people want quality food. I don’t eat that garbage anymore. It’s just some type of soy glued with high fructose corn syrup. I think people are starting to get it. If I must eat a quick bite out, I rather eat at Qdoba, Chipotle, or panara bread.

Jan 23, 2013 9:50am EST  --  Report as abuse
Harry079 wrote:
“as it and other fast-food chains fight for customers who are spending cautiously during continued economic uncertainty.”

So what do they do?

Raise the price of the dollar menu items.

Not by 25 cents or 50 cents.

But by 79 cents.

So in the battle to retain those customers you raise your prices on the items they purchase by 79%.

Good move.

Jan 23, 2013 1:15pm EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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