McDonald’s feeling the heat from fast-food rivals in the US

Shares fell as much as 2 per cent in New York, the biggest intraday drop in nearly two weeks

McDonald’s has been on a mission to improve its burgers with the introduction earlier this year of fresh quarter pounder sandwiches across the US, where the chain has about 14,000 locations. T

McDonald’s has been on a mission to improve its burgers with the introduction earlier this year of fresh quarter pounder sandwiches across the US, where the chain has about 14,000 locations. T

 

McDonald’s, the world’s biggest restaurant chain by sales, posted same-store growth in its home market that missed estimates in the second quarter, even as global growth continues at a steady clip. Slowing customer traffic in the US offset positive comparable guest counts in all other regions, resulting in a global guest count drop of 0.3 percent.

“The lighter same-store sales in the US is going to be where a lot of people question,” said Edward Jones analyst Brian Yarbrough. “The US was a little bit disappointing.”

Shares fell as much as 2.1 percent in New York, the biggest intraday drop in nearly two weeks. The shares had fallen 7.7 per cent this year through Wednesday’s close.

The slower-than-expected US sales growth comes as competitors increasingly elbow into what used to be McDonald’s territory. Starbucks, which has about the same number of US locations as McDonald’s, has been improving its food and trying to lock customers in with a growing rewards programme. As McDonald’s renews its breakfast push, Dunkin’ Donuts has started offering breakfast sandwiches during all hours, and just introduced doughnut fries for $2 (€1.71).

McDonald’s has been on a mission to improve its burgers with the introduction earlier this year of fresh quarter pounder sandwiches across the US, where the chain has about 14,000 locations. The chain also is adding delivery across the globe to bring food to customers increasingly looking for convenient meal options.

Same-store sales rose 4 per cent globally last quarter, compared with estimates of 3.6 percent. In the US, the key metric missed forecasts, rising 2.6 per cent, slower than first-quarter rates.

Excluding some items, profit amounted to $1.99 a share in the quarter that ended June 30th, compared with the $1.93 average of analysts’ estimates. Revenue was $5.35 billion, exceeding projections for $5.33 billion.

The company said in June that it was reducing corporate headcount to further trim expenses, and that it would incur $80 million to $90 million in charges related to severance pay and the closing of field offices in the second quarter.

The chain has recently struggled to regain its footing during breakfast time, and has been pushing egg sandwiches and coffee to lure Americans. After introducing all-day breakfast in 2015, the company has refocused its efforts on the morning hours, when competition is particularly steep, chief executive officer Steve Easterbrook said in April.

The Golden Arches is trying to improve its image among diners. Along with fresh beef, the chain is starting to phase out plastic straws in some European markets as concerns about consumer waste increase.

Comparable sales in the company’s international lead segment that includes the UK and Germany gained 4.9 per cent, beating the 4.1 per cent analysts had expected.

McDonald’s high-growth markets, including China and Italy, posted an increase of 2.4 per cent, compared with projections for 2.5 per cent growth. Strong demand in Italy helped this segment, while the company had “continued challenges in South Korea,” it said in a statement on Thursday.

- Bloomberg