By Julie Jargon And Chelsey Dulaney
McDonald's Corp. reported disappointing results for the first
full quarter under Chief Executive Steve Easterbrook, as U.S sales
fell more than expected despite new promotions and other turnaround
initiatives in its critical home market.
Sales at U.S. stores open at least 13 months fell 2% in the
three months through June, compared with the 1.5% drop analysts
polled by Consensus Metrix had expected. Global same-store sales
slipped 0.7%, worse than the 0.4% decline Consensus Metrix had
forecast.
McDonald's net profit sank 13% in the quarter.
Mr. Easterbrook, who became CEO on March 1, has made a number of
changes to try to revive a business that has been losing customers
to fast casual outlets and rival fast food chains, including
eliminating antibiotics from chicken, introducing better burgers,
adding customizable options and emphasizing the freshness of its
ingredients. McDonald's also has recently debuted new lemonades,
Sirloin burgers and Artisan grilled chicken sandwiches.
But McDonald's said recent products and promotions, such as the
sirloin burgers, didn't achieve the expected consumer response.
"We believe trends are improving and change is happening faster
at McDonald's than it has in the past," RBC Capital Markets analyst
David Palmer said in a research note. "That said, this change is
driving a gradual improvement rather than a 'big bang' to
sales."
Mr. Easterbrook acknowledged that the quarterly results were
"disappointing," but said "we are seeing early signs of momentum."
He said he expects McDonald's to post positive global same-store
sales in the third quarter.
In a statement, he said McDonald's will continue to work on
simplifying its menu and testing all-day breakfast service.
McDonald's has been testing all-day breakfast in some markets, the
results of which have been encouraging, according to a memo
reviewed by The Wall Street Journal, which said franchisees are
preparing to roll it out nationwide as soon as October, pending a
vote. Mr. Easterbrook didn't give any timeframe for a broad
rollout.
McDonald's also has been struggling in Asia, where food-safety
concerns have scared off many customers. In its division that
includes Asia, same-store sales in the quarter fell 4.5%. Europe
was the one bright spot, where same-store sales increased 1.2%.
McDonald's reported a profit of $1.2 billion, or $1.26 a share,
down from $1.39 billion, or $1.40 a share, a year earlier. Revenue
slid 9.5% to $6.5 billion. Analysts polled By Thomson Reuters had
forecast $1.23 a share in earnings and $6.45 billion in
revenue.
McDonald's has announced some structural moves to improve
results, such as selling thousands of restaurants to franchisees
and cutting $300 million in costs. Analysts have asked McDonald's
if it plans to do something more dramatic, such as spinning off
some of its real estate, which the company said it has explored in
the past.
McDonald's Chief Financial Officer Kevin Ozan stated in the
earnings release that McDonald's continues to "evaluate additional
ideas to further drive shareholder value through actions that
deliver sustainable long-term growth."
Write to Julie Jargon at julie.jargon@wsj.com and Chelsey
Dulaney at Chelsey.Dulaney@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