McDonald’s profit slips amid weak sales

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NEW YORK (AP) — McDonald’s is fighting to hold onto customers in the U.S.
The
world’s biggest hamburger chain said sales at established U.S.
locations fell 1.7 percent in the first quarter as guest counts fell.
The company also saw customer counts decline last year as it struggled
to manage an array of new menu items and fend off intensifying
competition.
CEO Don Thompson had conceded earlier this year that
McDonald’s lost some of its "customer relevance" and that it needs to do
a better job of underscoring value and service. On Tuesday, the company
attributed its U.S. sales performance in the latest quarter to
"challenging industry dynamics and severe winter."
The decline was
offset by stronger results in Europe, which pushed up global sales at
established locations by 0.5 percent. Profit for the first three months
of the year fell and missed Wall Street expectations.
The Oak
Brook, Ill.-based company said global sales for April are expected to be
modestly positive. April would reflect the first full month that Taco
Bell has offered its national breakfast menu, which it has pitched a
challenge to McDonald’s dominance in the morning hours.
The
declines in sales and customers in the U.S. reflect the struggles
McDonald’s faces as people flock to chains that position themselves as
higher-quality alternatives to traditional fast food. Chipotle, for
instance, said last week that sales rose 13.4 percent at established
locations.
Thompson has noted a split in the fast-food industry,
with people who have more spending money heading off the chains that
charge more. He said McDonald’s will focus on underscoring value for its
more cash-strapped customers, but the chain is also offering more
premium items such as its new Bacon Clubhouse Burger.
To adapt to
shifting trends, McDonald’s has also been rolling out new prep tables in
its U.S. kitchens that can hold more sauces and toppings.
The
idea is to eventually offer greater customization on its menu while
keeping orders easy to assemble for workers. Speed and accuracy have
been an issue for McDonald’s as it stepped up the pace of new menu items
in the past year.
In Europe, McDonald’s said sales rose 1.4
percent at established locations in the latest quarter. The figure rose
0.8 percent in the unit that encompasses Asia, the Middle East and
Africa, despite a decline in traffic.
For the quarter ended March 31, net income fell to $1.2 billion, or $1.21 per share. Analysts expected
$1.24 per share.
A
year ago, the company earned $1.27 billion, or $1.26 per share.
McDonald’s Corp. noted that the year-ago results were boosted by income
tax benefits.
Revenue edged up to $6.7 billion, but was shy of the $6.71 billion Wall Street expected.
Shares of McDonald’s edged up 83 cents to $100.50 in premarket trading.
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Follow Candice Choi at www.twitter.com/candicechoi
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