On Air Now

Listen

Listen Live Now » 92.5 FM Sioux Falls, SD

Weather

Current Conditions(Sioux Falls,SD 57104)

More Weather »
76° Feels Like: 76°
Wind: WSW 8 mph Past 24 hrs - Precip: 0.02”
Current Radar for Zip

Tonight

Scattered Thunderstorms 55°

Tomorrow

Sunny 77°

Tues Night

Clear 62°

Alerts

McDonald's sees no restaurant rebound in April

Construction work is seen as it continues in Joplin, Missouri May 17, 2012. REUTERS/Eric Thayer
Construction work is seen as it continues in Joplin, Missouri May 17, 2012. REUTERS/Eric Thayer

By Lisa Baertlein and Jessica Wohl

(Reuters) - Almost a year after taking over at McDonald's Corp , Chief Executive Don Thompson is still looking for the right recipe to expand restaurant sales, which are being pinched by the weak global economy and stronger competition from revived rivals.

The world's biggest fast-food chain on Friday dashed hopes that its restaurant sales would accelerate this spring, warning that global sales at established restaurants would be slightly lower in April.

The forecast sent McDonald's shares down 1.4 percent to $100.46 in midday trading.

A week ago, the shares hit a record high above $103 on expectations that results would improve in the second half of 2013, when the chain would no longer be up against year-earlier U.S. results that were bolstered by unseasonably warm winter weather.

When Thompson took the top job at McDonald's in July, the chain had been on a long winning streak and had a big lead over rivals.

That faltered when global economic weakness and intensified pressure from formerly weak but more nimble chains such as Burger King Worldwide Inc , Wendy's Co and Yum Brands Inc's Taco Bell caused its global-same restaurant sales to weaken.

McDonald's results were expected to improve in April because the company would only have to top 3.3 percent growth in global restaurant sales in April 2012. By comparison, sales were up a whopping 7.7 percent in March 2012. Thompson also had increased low-cost offerings worldwide and has plans for new menu items in the United States, where it recently rolled out new wrap sandwiches.

The McDonald's forecast for April "does put a little bit of a damper on the theory that as soon as comparisons got easier, comps were going to take off," Bernstein Research analyst Sara Senatore said.

While investors and analysts are giving Thompson and his management team time to revive restaurant sales, they could get impatient as the year wears on.

"There will be some pressure on the guys to pick up the pace," Edward Jones analyst Jack Russo said.

In addition, McDonald's reported a first-quarter profit that fell short of Wall Street expectations as global comparable sales fell 1 percent - slightly less than the 1.1 percent decline forecast by analysts polled by Consensus Metrix.

Net income inched up 0.3 percent to $1.27 billion, or $1.26 per share. Analysts, on average, were looking for $1.27 per share, according to Thomson Reuters I/B/E/S.

First-quarter revenue rose 0.9 percent to nearly $6.61 billion, higher than the $6.59 billion estimated by analysts.

The "challenging" global environment and profit pressures are expected to persist, Thompson said in a statement.

Cautious spending is not limited to the United States.

McDonald's Japan plans to introduce a new "Value Pick" line starting on May 7, including the value-priced McDouble sandwich. It also is revising prices - cutting the price of its small french fries but raising the prices of its hamburgers and cheeseburgers.

(Reporting by Lisa Baertlein in Los Angeles, additional reporting by Jessica Wohl in Chicago; Editing by Steve Orlofsky and John Wallace)

Comments