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McDonald’s Sales Hurt by Fourth-Straight U.S. Drop

By Leslie Patton
March 10, 2014 4:17 PM EDT 1486 Comments
A pedestrian walks past McDonald's Corp. signage in front of a restaurant in San Pablo.
Photographer: David Paul Morris/Bloomberg
A pedestrian walks past McDonald's Corp. signage in front of a restaurant in San Pablo.

McDonald’s Corp. (MCD), the world’s largest restaurant chain, said sales at stores open at least 13 months fell 0.3 percent in February as its U.S. business slumped for the fourth straight month amid harsh weather.

Analysts estimated a 0.1 percent decline, the average of 15 projections from Consensus Metrix. Domestic same-store sales slid 1.4 percent, Oak Brook, Illinois-based McDonald’s said in a statement today, while analysts anticipated a drop of 0.6 percent in the U.S.

McDonald’s, which has more than 14,200 U.S. locations, has been trying to attract Americans with coffee and breakfast foods. The fast-food industry also is struggling with shaky consumer confidence and a severe winter that McDonald’s says hurt its U.S. sales last month.

“Weather was definitely an impact in the month of February -- that’s going to be a drag on everybody,” Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. Also, rival fast-food chains are introducing new items, improving stores and drawing U.S. diners away from McDonald’s, he said.

“The other players from Wendy’s to Jack in the Box to Sonic to Burger King have just improved their game a little bit and they’re taking back some share,” he said.

The shares fell 0.3 percent to $95.20 at the close in New York. McDonald’s has slid 1.9 percent this year, while the Standard & Poor’s 500 Restaurants Index has dropped 1.7 percent.

Pressuring Margins

Little-changed global comparable-store sales so far this year will pressure margins in the first quarter, McDonald’s Chief Financial Officer Peter Bensen said in the statement.

While U.S. consumer sentiment rose in February after declining in January, the economy expanded at a slower pace in the fourth quarter than was previously estimated. Smaller gains in consumer spending, inventories and exports are weighing on the economy and indicate less momentum heading into 2014.

McDonald’s, along with other chains, is trying to draw diners and boost revenue in the morning. While it pushes new McCafe beverages and $1 coffees, Starbucks Corp. (SBUX) is revamping its breakfast sandwiches, and Yum! Brands Inc.’s Taco Bell is rolling out breakfast foods, such as sausage burritos and waffle tacos, to its U.S. stores this month. Burger King Worldwide Inc. (BKW) also has said it’s focused on improving and advertising its morning menu.

The fast-food industry also is facing increased scrutiny from lawmakers about employees’ wages. Democratic Representatives George Miller of California and Joe Courtney of Connecticut on March 6 sent letters to chains including McDonald’s and Yum Brands seeking information on their franchise agreements, worker-training materials and wage- and hour-law violations.

European Sales

McDonald’s February same-store sales rose 0.6 percent in Europe and fell 2.6 percent in the company’s Asia Pacific, Middle East and Africa region. Analysts estimated drops of 0.1 percent and 1.1 percent, respectively, according to Consensus Metrix, which is owned by Kaul Advisory Group in Wayne, New Jersey. Same-store sales declined 8.7 percent in Japan last month.

Breakfast foods and extended hours contributed to a “strong performance” in the U.K. and positive same-store sales in France, McDonald’s said.

Comparable-store sales are considered an indicator of a retailer’s performance because they include only older, established locations. McDonald’s has about 35,400 restaurants worldwide and 81 percent of those are franchised.

McDonald’s is scheduled to report first-quarter results on April 22.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, James Callan

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