McDonald’s First Quarter Earnings Plunge on Weak US Sales

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McDonald’s First Quarter Earnings Plunge on Weak US Sales

McDonald’s Corp reported a lower profit for the first quarter on Tuesday as high costs of beef reduced margins and less customer traffic caused a bigger-than-forecast drop in US sales.

The US fast-food chain has posted about two years of volatile sales at restaurants open in the US for at least 13 months, as a result of weak economic growth, tougher competition and internal blunders that have sophisticated menus and hampered service delivery.

First quarter net earnings dropped to $1.2 billion or $1.21 for every share.

Chief of Macdonald’s Don Thompson said in a press release that he anticipated a slightly positive performance in April for same-restaurant sales. According to Reuters, the chief executive might be pressed hard to improve the company’s performance, two years after taking charge.

There is still more obstacles for the chain, as the CEO deals with beef prices that have hit record highs, surging costs of labor and protests from its minimum-wage employees. The firm is also facing stiff competition for its breakfast business that has dominated the market.

Analysts predict that the chain may not report any substantial improvements in the near future.

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“We continue to view McDonald’s domestic business as hampered by a menu with far too many items on it, which is slowing average service times,” analyst Mark Kalinowski of Janney Capital Markets said.

The analyst added that a slow service will stand in the way of efforts to enhance customer visits. Quick service is a key factor in growth of any fast-food chain.

MacDonald’s comparable sales in Europe added 1.4% in the first quarter, with restaurants in the UK, France and Russia posting impressive gains.

However, the firm said that sales in Germany, Japan and Australia were unfavorable.

As BBC reports, the firm said it was emphasizing on stabilizing results in the markets as well as the US. Subscribe our newsletter services by visiting www.forexminute.com/newsletter

To contact the reporter of the story: Yashu Gola at yashu@forexminute.com