By Dow Jones Business News, October 21, 2013, 08:45:00 AM EDT
McDonald's 3Q Earnings Beat Estimates
McDonald's Corp. ( MCD ) beat third-quarter earnings estimates by a penny, but reported disappointing same-store sales
growth across the globe.
The burger giant said it expects flat global same-store sales for the month of October, despite what should be an easy
comparison to last October, when the chain reported the first monthly same-store sales decline in nine years. The
company also said restaurant margins in the fourth quarter are expected to decline at a level similar to that in the
first quarter, when McDonald's posted its largest quarterly margin decline in more than 10 years.
The results caused Janney Capital Markets analyst Mark Kalinowski to quip, "Weak sales trends give another meaning to
the term "grimace.'"
McDonald's continuing struggles underscore the external and internal challenges that have been vexing the company
since last year. Economic weakness around the world has caused consumers to pull back on restaurant spending and the
chain has made some mistakes in how it has addressed that uncertainty. In the U.S., for example, the chain recently
launched a limited-time offer of chicken wings, priced at $1 per wing, when some competitors offer them for as low as 25
cents per wing.
McDonald's Chief Executive Don Thompson admitted, during a call with investors Monday, that while the Mighty Wings
promotion sold within the lower range of company expectations, the price "was not considered the most competitive."
He said the chain has noticed a "bifurcation" of customers, with those at the lower end of the income spectrum
struggling to afford restaurant meals, while higher-income people are willing to spend more for food. McDonald's, he
said, is trying to strike the right balance between offering products for everyone in all of its global markets. The
chain plans to roll out a Dollar Menu & More lineup in the U.S. that includes its standard dollar items as well as
products priced at $2 and $5. Some of its higher-priced products haven't sold well, including the $4 Angus burgers the
chain pulled from its menu recently.
McDonald's reported a profit of $1.52 billion, or $1.52 a share, up from $1.46 billion, or $1.43 a share, a year
earlier. Analysts were expecting profit of $1.51 per share. Revenue rose 2.4% to $7.32 billion. Global sales at stores
open more than a year increased 0.9%, below expectations of 1.3% growth.
McDonald's shares were down around 1% to $94.23 each in early afternoon trading.
Write to Julie Jargon at firstname.lastname@example.org
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