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McDonald's Falls Short on Profit — Update

By Heather Haddon 

McDonald's Corp. is reaching for deals and price increases to boost sales as the chain tries to lure more customers.

The world's biggest burger chain by revenue said same-store sales grew 5.9% globally in the third quarter, above the 5.4% analysts polled by FactSet were expecting. Sales in the U.S. grew by 4.8%.

It took offerings and promotions, along with menu price increases, to boost sales, the Chicago-based company said. McDonald's Chief Executive Steve Easterbrook said in prepared remarks Tuesday that renovated stores are also contributing to more sales and visits.

Earnings of $1.6 billion were down 2% from a year earlier when accounting for currency fluctuations. The company reported earnings per share of $2.11 and sales of $5.4 billion. Analysts polled by FactSet expected earnings per share of $2.21 adjusting for one-time items, and $5.5 billion in sales.

Company executives said the income miss was minimal, while they chalked up differing ways of calculating margins to the gap with analysts on earnings. Lower gains in sales of company-owned stores in the U.S. contributed to the miss, McDonald's said.

Shares in the Chicago-based company fell 2% in premarket trading to $205. Its stock was up 18% so far this year through Monday's close.

Restaurants across the industry have increased menu prices to help boost sales as labor and other expenses grow. Consumer prices for food served at restaurants have grown recently by 3.2%, an increase not seen since 2009, Labor Department data shows.

Fast-food competition continues to be intense, particularly for burger-focused chains.

Visits to U.S. fast-food burger restaurants were down 1% in the year ending in August, according to research firm NPD Group Inc. That was weaker than the average for fast-food restaurants, which saw a 1% increase during the period.

McDonald's has been fighting for years to boost customer visits. Customer transactions continued to be flat in the quarter ending in September.

"Traffic is still negative. For me as president of the U.S., it's not satisfactory," said McDonald's USA President Chris Kempczinski at The Wall Street Journal Global Food Forum in New York earlier this month.

Mr. Kempczinski pointed to competitors adding more locations and demographic shifts in the U.S. as weighing on customer visits for McDonald's. An aging population has resulted in more Americans eating at home generally, analysts say.

Write to Heather Haddon at heather.haddon@wsj.com

 

(END) Dow Jones Newswires

October 22, 2019 09:37 ET (13:37 GMT)

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