McDonald's Bags Higher Profits on Value, But Offers Unappetizing Outlook

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NEW YORK (AP) - McDonald's Corp. (MCD) eked out a higher profit in the fourth quarter with the help of its Dollar Menu and the McRib, but the world's biggest hamburger chain also warned that a key sales figure is expected to drop this month.

The negative forecast reflects the intensifying competition and changing dining habits McDonald's is facing. Traditional rivals such as Burger King (BKW), Taco Bell (YUM) and Wendy's (WEN) have been revamping their menus and posing a bigger threat to the Golden Arches than they have in recent years.

In addition, people are increasingly heading to chains such as Chipotle (CMG) and Panera (PNRA) that offer restaurant quality food for slightly higher prices.

McDonald's earningsTo bolster slumping sales, McDonald's made a series of moves in recent months such as returning its focus on its Dollar Menu, shifting the introduction of its McRib from October to December and pushing franchisees to stay open on Christmas. In November, the company ousted the president of its U.S. business after a key sales figure dropped for the first time in nearly a decade. CEO Don Thompson said Wednesday that the figure is expected to drop again in January, reflecting the near-term pressures the company is facing.

For the October to December period, McDonald's said sales at restaurants open at least a year rose 0.1 percent globally. In the U.S., the figure rose 0.3 percent. But in Europe, McDonald's biggest market, the figure fell 0.6 percent as guest counts declined. It fell 1.7 percent in the region encompassing Asia, the Middle East and Africa.

The figure is an important measure of a restaurant chain's performance because it strips out the impact of newly opened and closed locations.

Howard Penney, a restaurant analyst for Hedgeye Risk Management, noted that operating profit margins were down globally for the quarter. When sales are up but margins are down, that means "you're giving away food," he said.

McDoanld's, based in Oak Brook, Ill., said it earned $1.4 billion, or $1.38 per share, for the quarter. That compares with $1.38 billion, or $1.33 per share, a year ago.

Revenue rose to $6.95 billion, up from $6.82 billion.

The results topped expectations for profit of $1.33 per share on revenue of $6.9 billion.

Thompson, who took over as CEO this summer, said the company continues to target total sales growth of 3 percent to 5 percent over the long term.


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142 Comments

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rymic

Barf! Do people really want to eat at McDonalds? I mean really....

January 27 2013 at 9:26 PM Report abuse rate up rate down Reply
Nick

Not to worry Mc Empire, haven't you been paying attention to the news and Obamarama? Everything is getting better; unemployment is down, unemployment benefits have been extended, companies are hiring again, gas prices are down, national spending limits have been raised, the fiscal cliff is a mere speed bump now and the market is up, up, up! So many more opportunities to sell those Dollar Menu specials...

Forget the fact that food prices are through the roof and climbing on even a whiff of weather problems, many people can't drive like they used to because they can't buy a car what with their bad credit, those unemployment checks aren't all winding up on the kitchen table and job seekers are going into their 4th year. Let's also not forget that the tab for ObamaCare is making itself felt this month and every working stiff is tickled pink to have seen the paycheck cut to take care of all those uninsureds out there. So much optomism out there it's just such a giddy time.....

January 24 2013 at 9:02 AM Report abuse rate up rate down Reply
Alphonso Carioti

McDonald's, as a company, will not go ot of business during the next 20 years or so. Hovever, to survive, I expect the franchise will change drastically. Their focus will need to be pointed more towards customer satisfaction tahn to margin in order to recapture some lost market share.

Increased dollar menu, higher customer service standards at point of sale and better employee benefits will be mandatory during the next few years of re-positioning the company.

January 24 2013 at 8:10 AM Report abuse rate up rate down Reply
Kuntheer

It's never a good business move to create a product that kills your customers; But hey; Even if McDonalds goes out of business, You can get almost the same quality by adding 1/4 cup of salt to your hamburger meat, 1/8 of a cup of sugar to your catch-up, leaving your Lettuce out for 1/2 a day, Not washing your hands before you make your food, and stopping by Kmart or Value village to pick up a cheap toy to throw in the box.

January 24 2013 at 8:02 AM Report abuse rate up rate down Reply
Anita Vercenza

they kill there animals by putting them in a huge chopping machine and running them in alive and chopping them up alive.its awful saw a vidio of it.coes pigs horses sheep anything that they want.thats your burgers all mixes up with blood brains bone..i wouldnt eat there for any one..discusting dirty and fleashy...yuk

January 24 2013 at 6:32 AM Report abuse rate up rate down Reply
Hank Kerchef

so much for freedom of choice. The health freaks are on the move again to violate your right to freely choose what to eat. Why cant these A-Holes understand that we have a right to choose our food. If you don't like a big mac,,, to Faaaaa''kin bad,,, don't buy one,,, but I have a right to eat it. These health freaks are completely ridiculous.

January 24 2013 at 5:05 AM Report abuse +1 rate up rate down Reply
Hank Kerchef

who cares what they sell,,, the health freaks should understand something,,, there are people that don't give a chit what they want,,, there is supposed to be this thing called "MY FREEDOM OF CHOICE" but health freaks seem to chip away at peoples right to choose. What,,are the communist? Food establishments are supposed to have the freedom to sell what they want. If a health freak doesn't like it , Go the Faaaaa to another place you selfish A-Hole. What is it now in society that A-Hole actists have to have everything their way and they don't want freedom of choice. Ignorant A=Holes

January 24 2013 at 5:00 AM Report abuse rate up rate down Reply
Gorgeous

It's time for McDisease to turn in their golden arches. My son and I ate here on Christmas Eve, and got the worst food poisoning I'd ever experienced in my life. I honestly thought I was going to die. We were sick for a week - and yes, we are certain it was from the McD's burger. Over the last several years, our visits have become fewer and farther between, as he service and food quality is consistently awful. Maybe when the franchises started being bought by foreigners who don't speak any English, they stopped following rules of cleanliness and proper food handling and preparation. The food is so incredibly toxic, it's frightening for anyone who consumes it and it should carry a warning like any other poison. I know we will NEVER go back again.

January 24 2013 at 3:47 AM Report abuse -1 rate up rate down Reply
1 reply to Gorgeous's comment
dembaitnswitch

cool

January 24 2013 at 3:51 AM Report abuse rate up rate down Reply
Gorgeous

It's time for McDisease to turn in their golden arches. My son and I ate here on Christmas Eve, and got the worst food poisoning I'd ever experienced in my life. I honestly thought I was going to die. We were sick for a week - and yes, we are certain it was from the McD's burger. Over the last several years, our visits have become fewer and farther between, as he service and food quality is consistently awful. Maybe when the franchises started being bought by foreigners who don't speak any English, they stopped following rules of cleanliness and proper food handling and preparation. The food is so incredibly unhealthy and inedible, I don't understand how anyone consumes it any more. I know we will NEVER go back again.

January 24 2013 at 3:44 AM Report abuse rate up rate down Reply
1 reply to Gorgeous's comment
dembaitnswitch

I never knew there was such a thing as better than worst food poisoning. How come you never learned to cook ?

January 24 2013 at 3:50 AM Report abuse +1 rate up rate down Reply
dougm90248

Posted by LuckyLuciano7: "My wife and I know a lady that has had a McDonalds cheeseburger in a ziplock bag for over 4 yrs and it has not molded! Please don't put this junk into your body!" Well, now, what kind of junk do YOU put in YOUR body? And what kind of junk should I put in MINE? Hmmmmmm?

January 24 2013 at 2:01 AM Report abuse -1 rate up rate down Reply
1 reply to dougm90248's comment
dembaitnswitch

arvig would love to have some, and some Ben and Jerry's icecream too.

January 24 2013 at 3:24 AM Report abuse rate up rate down Reply