(Adds analyst comment, details from conference call)
By Lisa Baertlein
Jan 23 McDonald's Corp reported
weaker-than-expected quarterly sales at established restaurants
on Thursday as fewer diners frequented the fast-food chain, and
warned that sales would again fall short of analysts'
expectations in January.
The world's biggest restaurant chain by revenue has reported
disappointing sales for five straight quarters, hurt by
self-inflicted operational stumbles, weak demand and intensified
competition from resurgent rivals such as Wendy's Co and
Burger King Worldwide Inc.
Indeed, efforts by Chief Executive Don Thompson to shore up
earnings in the 18 months since he took the top job at the
company - by tweaking menus and changing management - have not
The pressure is on him to boost McDonald's share price as
well. The stock is up just 7 percent since Thompson became chief
executive on July 1, 2012, well behind the 27-percent jump in
the Dow Jones Industrial Average index, of which McDonald's is a
Analysts predicted that investors would give Thompson a bit
more time to turn the company's fortunes before they begin to
advocate for big changes.
"If McDonald's doesn't fix itself by the end of 2014, the
drumbeat of activism will grow," Hedgeye Risk Management analyst
Howard Penney told Reuters.
On a conference call with analysts, McDonald's executives
said they "over-complicated" menus last year.
They vowed to re-engage customers this year with plans that
include customizing sandwiches, emphasizing breakfast and
coffee, and increasing marketing via mobile phones and other
Some critics have called on McDonald's to simplify
operations by downsizing its menu. Penney warned that the
company's new plan to customize sandwiches could further slow
Global sales at McDonald's restaurants open at least 13
months fell 0.1 percent during the fourth quarter, due in part
to severe winter weather in the United States.
Quarterly results were overshadowed by McDonald's forecast
for "relatively flat" January global sales at restaurants open
at least 13 months.
The January forecast "stands out as a healthy (same-store
sales) miss," Wells Fargo restaurant analyst Jeff Farmer said in
a client note. Analysts, on average, estimate a 2.4 percent gain
Analysts were optimistic that McDonald's sales trends would
improve in January, largely because the company turned in
lukewarm results in January 2013.
PROFIT BEATS, SALES MISS
McDonald's has about seven times the sales of Wendy's and
Burger King combined, but has had less success than those rivals
in tempting diners with limited-time specials and promotions.
Hyped new products, such as Mighty Wings, flopped. Beyond
that, the addition of 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 also switched its value-oriented "Dollar Menu" to
the "Dollar Menu & More" in November with slightly higher
prices. Executives said the heavily marketed new menu met
internal performance targets, but didn't appear to draw more
Closely watched global same-restaurant sales in December
were down 1.2 percent, versus a 0.6 percent gain expected by
analysts polled by Consensus Metrix.
The 3.8 percent drop in the United States was the biggest
shortfall - analysts expected a decline of just 0.6 percent -
but other regions also missed.
The Asia Pacific, the Middle East and Africa (APMEA) region
posted an unexpected 2.1 percent decline and Europe's 0.5
percent gain was about half what analysts expected.
Fourth-quarter net income was flat at $1.40 billion, or
$1.40 per share.
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
Still, shares ticked up 0.2 percent to $95.11 in afternoon
(Additonal reporting by Siddharth Cavale in Bangalore; Editing
by Joyjeet Das, Jilian Mincer, Bernadette Baum and Amanda Kwan)