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Last updated: April 19, 2013 6:39 pm
McDonald’s warned that soft global consumer spending would continue to hamper sales this month as it reported first-quarter earnings up slightly amid stiff competition from fast food rivals.
Franchisees have questioned the company’s focus on its dollar menu in order to gain market share, but Peter Bensen, chief financial officer, said the move was essential to ensure long-term success.
“In this environment where . . . you have soft economic, declining-to-flat eating out markets, that battle for market share becomes so critical to the long-term health of the business that we are willing to sacrifice a little bit of margin to maintain that traffic and grow the market share,” he said on a call with analysts.
The fast-food group reported net income of $1.270bn, or $1.26 per share, in the three months to March 31, up slightly from $1.267bn, or $1.23 per share, in the same period a year ago.
Sales rose 1 per cent to $6.61bn, compared with $6.55bn during the same quarter last year.
“While the company’s results for the quarter reflected difficult prior year comparisons and the ongoing impact of global economic headwinds, we continue our efforts to build market share and deliver sustained profitable growth for all stakeholders,” said Don Thompson, chief executive.
Global same-store sales fell 1 per cent during the quarter, while they were up 6.7 per cent during the same period last year as consumers ventured out during an unseasonably warm winter. Mr Thompson said April comparable sales are likely to be slightly negative as well.
The decline was led by a 1.2 per cent drop in US same-store sales and a 3.3 per cent drop in Asia, Middle East and Africa. European same-store sales fell 1.1 per cent.
After suffering through continued weak consumer spending in the second half of 2012, the Illinois-based company has renewed its focus on its lower-margin dollar menu, introducing new products to attract more foot traffic.
Margins at the 20 per cent of McDonald’s restaurants that are operated by the company fell to 16.2 per cent during the quarter, compared with 17.5 per cent during the same period last year.
Last quarter, McDonald’s reported a 1 per cent rise in global earnings to $1.4bn, on $6.95bn in revenues up from $6.82bn during the same period last year. The figures were helped by a rise in US sales.
Analysts had expected the world’s largest restaurant group to report earnings of $1.27 per share on $6.59bn.
Shares in McDonald’s were down 2.08 per cent in afternoon trading, to $99.79.
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