McDonald's earnings flat

MCDONALD'S Corp. has reported first-quarter net profits that were flat with year-ago earnings and revenues that inched slightly higher, citing extraordinarily strong year-before comparisons and continuing economic headwinds in the U.S. and worldwide.

The company's results are shown in the Table. McDonald's reported operating income that was down 1.0%, net income that was flat, global comparable sales that were down 1.0% and total revenues that were up just 1.0%.

Nevertheless, chief executive officer and president Don Thompson said the company remains "diligently focused" on investments to enhance its menu, reimage its restaurants and strengthen the customer experience "to become more relevant to today's consumers."

Operating results

In its U.S. division, McDonald's said comparable sales decreased 1.2% and operating income decreased 3.0% in the first quarter due, in part, to "the challenging eating-out environment" in which consumers have reduced the number of meals they eat at restaurants or have shifted to less-expensive food items and meals.

Still, the company said its U.S. business outperformed its competition and increased market share.

McDonald's said the business expanded its menu offerings with convenient and innovative new products and fortified its value leadership with its Dollar Menu.

In particular, the company introduced a Blueberry Pomegranate Smoothie and McWraps in the quarter. It said McWraps are popular at its European restaurants and are intended to compete with sandwich chains like Jimmy John's and Subway.

Subsequent to the close of the quarter, McDonald's introduced the Egg White Delight McMuffin to appeal to health-conscious consumers. The sandwich is made with 100% egg whites, extra-lean Canadian bacon and white cheddar cheese and is served on a new muffin made with 8 g of whole grains.

The Egg White Delight McMuffin is being promoted by U.S. Olympic gold medalist gymnast Gabby Douglas.

When introducing the sandwich last week, McDonald's said it also is offering customers the option of egg whites and white cheddar in its breakfast platters and other egg and cheese breakfast sandwiches.

McDonald's introduced the original Egg McMuffin more than 40 years ago.

In its European division, McDonald's said comparable sales decreased 1.1% due to continuing economic uncertainty, but operating income increased 1.0%, led by improved performance at restaurants in the U.K. and Russia.

Going forward, the company said the division plans to increase market share by emphasizing value across all dayparts, extending operating hours and offering "compelling premium products."

In its Asia Pacific, Middle East and Africa division, McDonald's said comparable sales decreased 3.3% and operating income was down 1.0% due largely to continuing economic weakness in Japan and negative results in China.

Moving forward, the company said the division plans to accelerate growth in its breakfast daypart, develop more convenience and service initiatives, offer "unique" value platforms and build new restaurants.

McDonald's said it returned $1.1 billion to shareholders in the first quarter in the form of dividends and stock repurchases. The company said while earnings were flat, per-share results were up 3.0% because there were fewer shares outstanding in the quarter than in the year-before period.

McDonald's, headquartered in Oak Brook, Ill., has 34,000 restaurants worldwide that serve 69 million customers every day. It reported 2012 revenues of $27.567 billion.

Volume:85 Issue:17