Golden Arches may see dip in second quarter

NEW YORK (AP) — McDonald’s Corp. says strength in the U.S. and Europe drove up a key rev­enue fig­ure in May, but warned that eco­nomic volatil­ity around the world and ris­ing expenses are pres­sur­ing its second-quarter results.

The fast-food chain, based in Oak Brook, Ill., also said that for­eign cur­rency trans­la­tions are now expected to hurt second-quarter earn­ings by 7 cents to 9 cents per share.

Shares of McDonald’s fell 63 cents to close at $87.75 Friday.

For May, the com­pany says global sales at stores open at least 13 months rose 3.3 per­cent. That is a key met­ric because it excludes the volatil­ity from newly opened or closed stores.

The fig­ure was dragged down by results in the region encom­pass­ing Asia Pacific, the Mid­dle East and Africa, where McDonald’s said sales fell 1.7 per­cent from a year ago.

The neg­a­tive per­for­mance in China was likely the result of new “value din­ner” pro­mo­tions that drove down aver­age checks per visit, R.W. Baird ana­lyst David Taran­tino said in a note to investors. He also noted that McDonald’s is fac­ing increas­ing com­pe­ti­tion in the region, where many other fast-food com­pa­nies are look­ing to expand as well.

McDonald’s noted that it’s work­ing to improve results in the region with locally rel­e­vant menu options and “con­ve­nience enhance­ments,” such as deliv­ery in some Asian markets.

The drop in the region was off­set by a 4.4 per­cent jump in the U.S., where demand for the new blue­berry banana wal­nut oat­meal and Cherry Berry Chiller boosted sales.

In Europe, the sales fig­ure rose 2.9 per­cent dri­ven by gains in the United King­dom, Rus­sia and France, with the company’s ongo­ing restau­rant ren­o­va­tions help­ing improve sales. A mix of pre­mium and value options also helped boost results in the region, the com­pany said.

With more than 33,000 stores in 119 coun­tries, McDonald’s is the world’s biggest ham­burger chain and is often seen as a bell­wether for the industry.

Although it has con­sis­tently out­per­formed its rivals, McDonald’s is fac­ing the same pres­sures from the global econ­omy and ris­ing ingre­di­ent costs that are squeez­ing the entire industry.

In a note to investors, Bern­stein ana­lyst Sara Sen­a­tore said McDonald’s faces increas­ing com­pe­ti­tion in mar­kets includ­ing the U.S., Ger­many, Japan and China, and that the results in May sug­gest a slower pace of growth ahead after a long period of exceed­ing expectations.

For the year-to-date, McDonald’s sales at stores open at least 13 months is up 5.6 per­cent, which includes a 6.8 per­cent jump in the U.S., a 4.2 per­cent jump in Europe and 3.1 per­cent increase in the region encom­pass­ing Asia Pacific, Mid­dle East and Africa.

Posted by Becky Brooks on Jun 9 2012. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.