By Chelsey Dulaney
McDonald's Corp. on Friday posted a worse-than-expected 21% drop
in earnings its December quarter, rounding out a dismal year for
the fast-food chain that prompted core changes to its business.
The fast-food chain also warned that its January sales would
likely be negative and its results for the first half of the year
would be pressured, indicating that a turnaround isn't expected
quickly.
"2014 was a challenging year for McDonald's around the world.
Our results declined as unforeseen events and weak operating
performance pressured results in each of our geographic segments,"
Chief Executive Don Thompson said in a news release. "Our business
continues to face meaningful headwinds."
Still, shares gained 1.2% in premarket trading as McDonald
unveiled a $2 billion capital spending plan for 2015--its lowest
capital budget in more than 5 years--as it seeks to shore up its
balance sheet.
McDonald's has been working to rejuvenate its business in recent
months after posting some of its worst monthly sales figures in
more than a decade last year.
The company has been losing customers to fast-casual chains and
to such rivals as Five Guys Holdings LLC and Chick-fil-A Inc. that
focus on just a few menu items. McDonald's menu has become bloated
in recent years as the chain has added everything from fruit
smoothies to salads in a bid to appeal to a broad range of
customers. The result has been slower service, which has driven
away many customers.
Mr. Thompson has vowed to fix the problems, announcing plans to
cull menu items and give customers the option of more customized
ordering. Executives also have said the chain plans to study every
ingredient in its products and to review different cooking and
holding techniques to improve the quality of its food.
Overall, McDonald's reported a profit of $1.1 billion, or $1.13
a share, down from $1.4 billion, or $1.40 a share, a year
earlier.
Revenue fell 7.3% to $6.57 billion.
Analysts polled by Thomson Reuters had expected earnings of
$1.22 a share on revenue of $6.68 billion.
For the quarter ended Dec. 31, McDonald's said global same-store
sales fell 0.9% as traffic declines across all segments.
U.S. same-store sales slid 1.7% from a year earlier.
In the company's Asia-Pacific, Middle East and Africa region,
sales at existing locations fell 4.8%. McDonald's performance in
the region has improved somewhat after one of its meat suppliers
was accused of intentionally selling expired meat to restaurants in
July. The scandal shook consumer confidence and has driven down
sales in recent months. McDonald's said it expects the supplier
issue and currency fluctuations to bring down its fourth-quarter
results.
In Europe, broader economic softness has been compounded by
political complications in Russia, where authorities have been
inspecting and shutting McDonald's restaurants--widely seen as
retaliation for U.S. sanctions in response to Russia's military
incursion in Ukraine. McDonald's sales fell 1.1% in the division,
as results also were weighed by weakness in France and Germany.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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