McDonald’s Beats the Street, Profit Drops 13%

Earnings Reuters

McDonald's Corp (MCD) said it expects global comparable sales to rise in the current quarter, after four straight quarters of decline, as its new chief executive's initiatives to boost sales start paying off along with a recovery in China.

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McDonald's shares rose 1.5 percent in premarket trading after the company also reported better-than-expected sales and profit for the second quarter on Thursday.

Global sales at McDonald's restaurants open at least 13 months fell a steeper-than-expected 0.7 percent in the quarter ended June 30, due to a drop in traffic in all major markets.

However, this was the slowest decline in four quarters for the world's largest restaurant chain by sales.

Analysts on average expected same-restaurant sales to fall 0.4 percent, according to research firm Consensus Metrix.

McDonald's CEO Steve Easterbrook, appointed in March, has reorganized the business with the aim of bolstering sales by offering all-day breakfast, tweaking menus to reflect regional tastes and experimenting with custom hamburger toppings.

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The company said on Thursday it expects these initiatives to pay off in the third quarter.

McDonald's has been struggling on myriad fronts – it is trying to recover from a food scare in China that battered Asian sales and is wrestling with economic weakness and political upheaval in Europe, its top revenue market.

The company has also lost market share in the United States, where smaller, nimbler rivals such as Wendy's Co <WEN.O> and Chipotle Mexican Grill Inc <CMG.N> have adapted faster and better to consumers' increasing preference for healthier fare over processed fast-food.

McDonald's said quarterly same-restaurant sales fell 2 percent in the United States, the chain's top market for profit, as featured products and promotions failed to boost traffic.

However, same-restaurant sales rose 1.2 percent in Europe due to strong sales in the United Kingdom and Germany.

Analysts had expected sales to decline 1.5 percent in the United States and rise 1.5 percent in Europe.

Net income fell to $1.20 billion, or $1.26 per share, from $1.39 billion, or $1.40 per share. Total revenue fell 10 percent to $6.50 billion.

Analysts on average were expecting a profit of $1.23 per share, on revenue of $6.46 billion, according to Thomson Reuters I/B/E/S.

(Fixes typo in first paragraph)

(Reporting by Siddharth Cavale in Bengaluru; Editing by Savio D'Souza)

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