McDonald's warns that weak sales will hit fourth-quarter profit

McDonald's Corp on Monday reported a steeper-than-expected drop in global sales at established restaurants in November, hurt by weakness in the United States and Asia, and warned that such results would "significantly pressure" margins in the current quarter.

November marked the sixth straight month of worldwide same-restaurant sales declines at McDonald's, which is battling changing consumer tastes, tough U.S. competition, the after-effects of a supplier scandal in Asia and economic and political turmoil in Europe.

Worldwide sales at restaurants open at least 13 months were down 2.2 percent in November, more than the 1.7 percent decline expected by analysts polled by research firm Consensus Metrix.

Shares in McDonald's were down 3.5 percent to $92.97 in early trading on the New York Stock Exchange.

Chief Executive Officer Don Thompson, who took the helm in July 2012, has shaken up management and is giving more power to local operators in a bid to improve results.

Despite that, U.S. sales at restaurants open at least 13 months tumbled 4.6 percent in November. Analysts, on average, were expecting a decline of 1.9 percent.

McDonald's U.S. same-restaurant sales have not increased since October 2013, in part due to competition from smaller and more nimble direct rivals ranging from Wendy's Co and Burger King Worldwide Inc to In-N-Out Burger and Chick-fil-A.

The company is localizing U.S. menus and putting greater focus on customization and fresh ingredients as it also seeks to better compete with popular chains like Chipotle Mexican Grill Inc and Subway, where diners pick the ingredients that go into their meals.

The stronger U.S. dollar also is expected to reduce fourth-quarter profit by as much as 9 cents per share, McDonald's said on Monday.

Same-restaurant sales fell 4 percent in the Asia/Pacific, Middle East and Africa (APMEA) unit last month. That division has not yet recovered from a China meat supplier scandal that drove away diners and sent restaurants scrambling to find new sources of ingredients for its Chicken McNuggets and Big Macs.

The company said the weak APMEA results could cut McDonald's profits by as much as 10 cents a share in the current quarter that ends on Dec. 31.

Europe's same-restaurant sales were down 2 percent in November, hurt by "very weak" results from Russia and declines in France and Germany.

Reuters