McDonald’s expects same-restaurant sales to improve in quarter

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Published: July 24, 2015 7:50:48 AM

McDonald's Corp's new chief executive expects global sales at established restaurants to grow in the current quarter, reversing more than a year of declines, and said his turnaround plan was showing early signs of taking hold".

McDonald’s Corp’s new chief executive expects global sales at established restaurants to grow in the current quarter, reversing more than a year of declines, and said his turnaround plan was showing early signs of taking hold.

The world’s biggest fast-food chain, which popularized burgers and french fries, is battling nimble rivals who are doing a better job of meeting consumers’ growing appetite for fresher, less processed food.

Since taking the helm in March, McDonald’s CEO Steve Easterbrook repeatedly has vowed to turn McDonald’s into “a modern, progressive burger company.”

Easterbrook, who rolled out his turnaround plan in May, on Thursday said: “While our second quarter results were disappointing, we are seeing early signs of momentum.”

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.

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

Same-restaurant sales in the United States, McDonald’s No. 1 profit market, dropped a steeper-than-expected 2 percent in the latest quarter as customer visits fell and featured products and promotions missed their mark.

Easterbrook, who has cut jobs and announced plans to close underperforming restaurants, has responded to intense U.S. competition from rivals such as Chipotle Mexican Grill Inc , Chick-fil-A and “better burger” chains like Shake Shack Inc, by experimenting with custom burger toppings, regional menus and breakfast all day.

McDonald’s U.S. also plans to switch to chicken raised with fewer antibiotics.

The chain’s U.S. restaurant operators, many of whom are grappling with significant renovation debt and slumping sales, have urged Easterbrook to move more aggressively on his plan to simplify McDonald’s large menu.

Shares in McDonald’s were up modestly, adding 0.4 percent to $97.96 in early trading.

Analysts noted McDonald’s global same-restaurant sales had dropped a steep 3.3 percent in the third quarter of 2014, suggesting it should be easy for the company to show year-over-year growth.

In the latest quarter, McDonald’s net income fell to $1.20 billion, or $1.26 a share, from $1.39 billion, or $1.40 per share a year earlier. Total revenue fell 10 percent to $6.50 billion.

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

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