McDonald's said Friday its first-quarter profit was flat from a year
earlier as the world's largest hamburger chain continued to face a string of
disappointing monthly sales blamed on penny-pinching consumers and intense
Though McDonald's expressed optimism that its efforts to drive sales improvements, such as a focus on the Dollar Menu to drive more store traffic, it warned that April sales at established stores would again be slightly negative.
Sales at stores open more than a year are a key indicator of performance because they exclude the bump from newly opened stores. McDonald's shares fell almost 2 percent.
McDonald's saw its global same-store sales, or sales at stores open at least 13 months, fall in January for the first time in nine years. The decline has continued as the global economy remains sluggish and competition has heated up from fast-food rivals like Burger King and Wendy's. Still, McDonald's said it expanded its slice of the fast food market in the first three months of the year.
The Oak Brook-based company earned $1.27 billion, or $1.26 per share in the most recent quarter, compared with last year's first-quarter profit of $1.27 billion or $1.23 per share. The reason overall profit stayed the same and per-share results improved is because McDonald's had fewer outstanding shares this year than last.
Revenue inched higher to $6.61 billion from $6.55 billion in last year's first quarter. Sales at established stores across the globe fell 1 percent.
Executives on a conference call urged patience on behalf of investors. While analysts -- and even some of McDonald's franchisees -- have questioned the company's plan to cut some prices and focus on cheaper menu items as a means to attract more customers, Chief Financial Officer Peter Bensen said the company is executing on its plan to take a bigger slice of the fast-food market.
"The battle for market share has become so critical that we're willing to sacrifice some margin ... if that is what we have to do to win," Bensen said.
In a note to clients Friday, Mark Kalinowski, an analyst with Janney Montgomery Scott, cut his earnings estimates for this year and next based on Friday's report, but kept his "Buy" rating on the stock, saying he expects McDonald's massive improvement effort to eventually take hold.
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