By Julie Jargon
McDonald's Corp. plans a marketing push to emphasize its
fresh-cooked breakfasts as it battles growing competition for the
morning meal.
Competition at breakfast has heated up recently as Yum Brands
Inc.'s Taco Bell entered the business with its new Waffle Taco last
month and other rivals have added or discounted breakfast
items.
McDonald's Chief Executive Don Thompson said it hasn't yet
noticed an impact from Taco Bell's breakfast debut, but that the
overall increased competition "forces us to focus even more on
being aggressive in breakfast."
Mr. Thompson's comments came after McDonald's on Tuesday
reported that its profit for the first three months of 2014 dropped
5.2% from a year earlier, weaker than analysts' expectations.
Comparable sales at U.S. restaurants open more than a year declined
1.7% for the quarter and 0.6% for March, the fifth straight month
of declines in the company's biggest market. Global same-store
sales rose 0.5% for both the quarter and month.
Mr. Thompson acknowledged again that the company has lost
relevance with some customers and needs to strengthen its menu
offerings. He emphasized Tuesday that McDonald's is focused on
stabilizing key markets, including the U.S., Germany, Australia and
Japan.
The CEO said McDonald's has dominated the fast-food breakfast
business for 35 years, and "we don't plan on giving that up."
The company plans in upcoming ads to inform customers that it
cooks its breakfast, unlike some rivals.
"We crack fresh eggs, grill sausage and bacon," Mr. Thompson
said. "This is not a microwave deal."
Beyond breakfast, McDonald's also plans to boost marketing of
core menu items such as Big Macs and french fries, since those core
products make up 40% of total sales.
To serve customers more quickly, the chain is working to
optimize staffing, and is adding new prep tables that let workers
more efficiently add new toppings when guests want to customize
orders.
McDonald's also said it aims to sell more company-owned
restaurants outside the U.S. to franchisees. Currently, 81% of its
restaurants around the world are franchised. Collecting royalties
from franchisees provides a stable source of income for a
restaurant company and removes the cost of operating them.
McDonald's reported a first-quarter profit of $1.2 billion, or
$1.21 a share, down from $1.27 billion, or $1.26 a share, a year
earlier. The company partly attributed the decline to the effect of
income-tax benefits in the prior year.
Total revenue for the quarter edged up 1.4% to $6.7 billion,
though costs rose faster, at 2.3%.
Analysts polled by Thomson Reuters forecast earnings of $1.24 a
share on revenue of $6.72 billion.
Ben Fox Rubin contributed to this article.
Write to Julie Jargon at julie.jargon@wsj.com
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