McDonald’s Just Had a Rough Quarter

July 26, 2016, 2:17 PM UTC
McDonald's Same Store Sales Up 7.1 Percent In January
SAN FRANCISCO - FEBRUARY 09: A sign stands outside of a McDonald's restaurant February 9, 2009 in San Francisco, California. Fast food chain restaurant McDonald's reported a 7.1 percent increase in same store sales for January as people look towards cheaper food alternatives in the weakening economy.
Photograph by Justin Sullivan — Getty Images

McDonald’s (MCD) reported much lower-than-expected quarterly sales growth at established restaurants in the United States and the fast-food chain said it faced “a challenging environment in several key markets.”

The company’s shares fell as much as 3.7 percent to $122.63 in early trading on Tuesday.

Comparable sales at U.S. restaurants open at least 13 months rose 1.8 percent in the second quarter, amid what the company called a “softening industry growth.”

Analysts on average had expected a 3.2 percent growth, according to research firm Consensus Metrix.

U.S. restaurants contributed to about one-third of total revenue in 2015.


“There is no doubt that in the United States the market as a whole was weak across the reporting period, with lower growth in consumer expenditure on fast food and casual dining,” said Neil Saunders, chief executive of research firm Conlumino.

Smaller rival Wendy’s (WEN) in May warned of a sales slowdown in its second quarter, partly due to a cool spring in Northeastern United States.

Comparable sales at worldwide restaurants increased 3.1 percent, but missed analysts’ average estimate of 3.6 percent rise.

Total revenue declined 3.5 percent to $6.27 billion, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.

Net income at the world’s biggest fast-food chain fell 9.1 percent to $1.09 billion, or $1.25 per share, in the quarter ended June 30.

The company recorded pre-tax charges of about $230 million, or 20 cents per share, in the latest quarter related to refranchising initiatives and relocation of its headquarters to Chicago.

Excluding these items, McDonald’s earned $1.45 per share, according to Thomson Reuters calculation, topping the average estimate of $1.38.

McDonald’s said it would add more varieties of sandwiches to its all-day breakfast during the remainder of the year, as the company looks to capitalize on its success.

Up to Monday’s close, McDonald’s shares had risen 7.8 percent this year.

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