McDonald's second-quarter profit falls, shares slide

Mon Jul 23, 2012 4:18pm EDT
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By Lisa Baertlein

(Reuters) - McDonald's Corp (MCD.N: Quote) reported lower-than-expected quarterly profit on Monday, hurt by a weakening global economy and the impact of a stronger dollar, and said sales growth at established restaurants would slow this month.

The rare profit miss from the world's biggest hamburger chain showed the sluggish U.S. economy and Europe's belt tightening are pinching even the most resilient restaurant operators, as diners limit spending for meals away from home.

"We're seeing more markets that are having consumer confidence issues ... It's a little more than a European cold, if you would," McDonald's Chief Executive Officer Don Thompson said on a conference call with analysts.

Shares in McDonald's, which has stepped up advertising for its low-priced food to keep customers coming through its doors, fell $2.64, or 2.9 percent, to close at $88.94 on the New York Stock Exchange. The stock hit all-time highs of over $100 earlier this year as it outperformed rivals and consolidated market share.

McDonald's results came days after Chipotle Mexican Grill Inc (CMG.N: Quote), one of the best-performing restaurant chains, surprised investors by saying the lethargic U.S. recovery had cooled same-restaurant sales growth, adding to concerns about how much consumers were cutting back on discretionary spending.

"We knew it was going to be a tough quarter going in, and it certainly was," Edward Jones analyst Jack Russo said.

"This year is going to be a challenge for the chain. Europe (its biggest market for sales) has slowed down, and the consumer remains pretty frugal," Russo said.

Closely watched global sales at restaurants open at least 13 months decelerated during the month of June -- increasing 4.4 percent versus 7.7 percent a year earlier.   Continued...

A McDonald's restaurant's drive-thru sign is pictured in Los Angeles April 4, 2011. REUTERS/Mario Anzuoni