Quantcast

Monday, July 28, 2014         

 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

McDonald's barely increases its earnings amid lower sales

By Candice Choi

Associated Press

POSTED:

<br />associated press / may 2<br />@Caption1:McDonald's saw its first quarterly sales decline in a decade. A sign advertises job openings outside <br />a McDonald's restaurant in Chesterland, Ohio.<br />

NEW YORK » McDonald's managed to eke out a higher profit for its first quarter even as the world's biggest hamburger chain failed to lift sales with its Dollar Menu.

The company said Friday that an important sales measurement fell 1 percent during the period and warned that it's expected to dip again in April.

That marked the first quarterly decline in a decade in sales at restaurants open at least 13 months and underscored the troubles the company has been facing.

For the quarter, McDonald's earned $1.27 billion, or $1.26 per share. That compares with $1.267 billion, or $1.23 per share, a year ago.

Revenue edged up 1 percent to $6.6 billion.

Analysts expected a profit of $1.26 per share on revenue of $6.59 billion, according to FactSet.

As Burger King and Wendy's have stepped up their marketing over the past year or so, McDonald's has responded by aggressively touting its Dollar Menu and other value deals to hold on to customers in an industry where imitation is rampant.

The strategy has caused concern among analysts who worry that it could eat into profit margins. It's also rankled some McDonald's franchisees, who operate the vast majority of its restaurants in the U.S.

But in a conference call with analysts Friday, McDonald's executives insisted that offering cheaper prices was necessary in the current climate. Since the restaurant industry is barely growing, they said McDonald's needs to steal customers away from rivals to grow.

"That battle for market share has become so critical for the long-term health of business, we're willing to sacrifice that margin," said Peter Bensen, the company's chief financial officer.

Although profit margins declined during the first quarter, McDonald's noted that it picked off market share in many parts of the world, including the U.S.

But there are signs such deals aren't sitting well with the independent franchisees who operate restaurants.

A survey by Janney Capital Markets released this week found that a sampling of 25 U.S. franchisees who collectively operate 180 McDonald's restaurants on average rated their relations with the company below their historic levels. Janney said some complained about excessive coupons and discounts.

Meanwhile, McDonald's emphasis on the Dollar Menu, which began last year, has had a ripple effect in the industry. Burger King recently said it's retooling its strategy and is now touting a deal for a $1.29 Junior Whopper, among others. Wendy's also revamped its value menu last year, saying it wants to offer customers more options.






 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

COMMENTS
(0)
You must be subscribed to participate in discussions
By participating in online discussions you acknowledge that you have agreed to the TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. Because only subscribers are allowed to comment, we have your personal information and are able to contact you. If your comments are inappropriate, you may receive a warning, and if you persist with such comments you may be banned from posting. To report comments that you believe do not follow our guidelines, email commentfeedback@staradvertiser.com.
Leave a comment

Please login to leave a comment.
IN OTHER NEWS
Latest News/Updates
Blogs
Political Radar
`My side’

Political Radar
‘He reminds me of me’

Bionic Reporter
Needing a new knee

Warrior Beat
Monday musings

Small Talk
Burning money

Political Radar
On policy

Warrior Beat
Apple fallout