By Annie Gasparro
McDonald's Corp. said its sales continue to struggle as new
Chief Executive Steve Easterbrook rolls out his effort to win back
customers in the U.S.-a task he says won't be easy.
The Oak Brook, Ill. burger giant is off to a rough start this
year, reporting on Wednesday that its U.S. same-store sales fell
2.6% in the first quarter, including a 3.9% decline in March--worse
than analysts expected. Total profit for the quarter also fell by a
steeper-than-expected 32%, in part because of changes in
foreign-exchange rates.
McDonald's, which is battling changes in Americans' eating
habits and food-safety issues in Asia, said it expects that
same-store sales--a key metric covering restaurants open at least
13 months--to be negative again for April.
"As you go through turnarounds...they are a little bumpy by
nature," Mr. Easterbrook said on a conference call. "And that does
require some bold and decisive decision-making."
McDonald's said it would shutter 700 underperforming restaurants
this year, primarily in the U.S., China and Japan-twice as many as
it had previously planned to close and about 2% of its 36,000
restaurants world-wide.
McDonald's is nearly two months into its turnaround effort under
Mr. Easterbrook, who became CEO on March 1. On Wednesday, he said
he would host an investor presentation May 4 to detail his initial
steps to make McDonald's a "modern and progressive burger
company."
The British-born CEO already has announced major changes, with
McDonald's in the U.S. unveiling plans in recent weeks to raise
wages for restaurant workers, curb antibiotic use in its chicken,
and test an all-day breakfast menu.
"We need to act now, and where we need to make an impact, I'm
not looking for incremental steps," Mr. Easterbrook said on
Wednesday. Given McDonald's 60-year history, there is conservatism
in the corporate culture, he said, but "we're challenging some of
the conventional thinking on multiple fronts."
Shares rose 2% Wednesday afternoon, leaving them up 9% since Mr.
Easterbrook's appointment as CEO was announced in late January.
Janney Capital Markets analyst Mark Kalinowski said investors
were likely pinning their hopes on Mr. Easterbrook sparking some
"pizazz" at his May 4 presentation, though he said that will be
hard since McDonald's has already made several significant
announcements.
Some of Mr. Easterbrook's efforts have drawn ire among the
franchisees who run the vast majority of McDonald's restaurants.
Some franchisees said they fear the cost of proposed changes and
feel betrayed by the company's actions.
For instance, McDonald's added new premium chicken sandwiches
and sirloin burgers to the menu, while in the midst of an effort to
simplify it to be more efficient and shorten wait times.
Mr. Easterbrook said necessary change sometimes causes friction.
"There are things we can learn from one or two decisions we've
made. It doesn't mean the decisions are wrong," he said.
Overall, McDonald's reported a profit of $811.5 million, or 84
cents a share, for the latest quarter, down from $1.2 billion, or
$1.21 a share, a year earlier. The results included 17 cents per
share related to write-offs and restructuring and 9 cents a share
related to foreign currency. Analysts polled by Thomson Reuters had
expected earnings of $1.06 a share.
Revenue fell 11% to $5.96 billion, in-line with Wall Street
expectations.
Global same-store sales for the quarter fell 2.3%, including an
8.3% drop in the Asia-Pacific division, where it is struggling with
perception issues after food-safety scares in China and Japan.
Chelsey Dulaney contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com
Access Investor Kit for McDonald's Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5801351017
Subscribe to WSJ: http://online.wsj.com?mod=djnwires