McDonald's Falls Short on Profit -- 2nd Update
22 Outubro 2019 - 11:54AM
Dow Jones News
By Heather Haddon
McDonald's Corp. needed promotions and price increases to help
boost sales in the third quarter as the world's biggest burger
chain by revenue works to lure more customers.
Shares of McDonald's, up 18% over the past year through Monday's
close, slid nearly 3% as third-quarter sales and earnings from the
world's biggest burger chain fell short of expectations.
The company Tuesday said same-store sales grew 5.9% globally in
the third quarter, above the 5.4% analysts polled by FactSet were
expecting. But U.S., growing by 4.8%, were down from the previous
quarter and below analyst expectations.
It stillm took offerings and promotions, along with menu price
increases, to boost sales, the Chicago-based company said.
McDonald's Chief Executive Steve Easterbrook said in prepared
remarks Tuesday that renovated stores are also contributing to more
sales and visits.
Earnings of $1.6 billion were down 2% from a year earlier when
accounting for currency fluctuations. The company reported earnings
per share of $2.11 and sales of $5.4 billion. Analysts polled by
FactSet expected earnings per share of $2.21 adjusting for one-time
items, and $5.5 billion in sales.
Company executives said the income miss was minimal, while they
chalked up differing ways of calculating margins to the gap with
analysts on earnings. Lower gains in sales of company-owned stores
in the U.S. contributed to the miss, McDonald's said.
Restaurants across the industry have increased menu prices to
help boost sales as labor and other expenses grow. Consumer prices
for food served at restaurants have grown recently by 3.2%, an
increase not seen since 2009, Labor Department data shows.
Fast-food competition continues to be intense, particularly for
burger-focused chains.
Visits to U.S. fast-food burger restaurants were down 1% in the
year ending in August, according to research firm NPD Group Inc.
That was weaker than the average for fast-food restaurants, which
saw a 1% increase during the period.
McDonald's has been fighting for years to boost customer visits.
Customer transactions continued to be flat in the quarter ending in
September.
"Traffic is still negative. For me as president of the U.S.,
it's not satisfactory," said McDonald's USA President Chris
Kempczinski at The Wall Street Journal Global Food Forum in New
York earlier this month.
Mr. Kempczinski pointed to competitors adding more locations and
demographic shifts in the U.S. as weighing on customer visits for
McDonald's. An aging population has resulted in more Americans
eating at home generally, analysts say.
McDonald's has struck a number of technology deals this year to
try to boost sales and improve operations. But those deals are
driving up expenses. The company said Tuesday that administrative
expenses grew 6% during the quarter, and McDonald's now expects
those costs to grow by 1% to 2% during the fiscal year. Previously,
the company expected those costs to be flat for the year.
The burger chain acquired Silicon Valley-based tech startup
Apprente last month to tap the company's voice-activated technology
to try to speed up service in its drive-throughs. McDonald's
acquired Israeli startup Dynamic Yield earlier this year to use AI
in suggestive ordering, and has quickly expanded it to thousands of
U.S. restaurants.
And it has placed increasing emphasis on delivery, striking
deals with DoorDash Inc. and Grubhub Inc. to bolster its existing
to-go business with Uber Technologies Inc.'s Uber Eats
division.
Delivery comes with a hit on restaurant margins, something
McDonald's franchisees have pushed back on and the company has
sought to address through its negotiations with third-party
operators.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
October 22, 2019 10:39 ET (14:39 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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