McDonald’s Q3 profit plunges steep 30%

CHICAGO • McDonald’s Corp., the world’s largest restaurant chain, said thirdquarter profit fell 30% as U.S. sales slumped for the fourth straight quarter.

Net income dropped to US$1.07-billion, or US$1.09 a share, from US$1.52-billion (US$1.52) a year earlier, the company said Tuesday.

McDonald’s has been struggling to draw U.S. diners as rivals offer deals and introduce new items. The company also has lost customers by boosting prices on burgers to make up for rising labour and ingredient costs.

Sales at McDonald’s U.S. stores open at least 13 months fell 3.3% in the third quarter, trailing the 2.9% decline estimated by analysts in a Consensus Metrix survey.

“There’s just some [market] share loss that’s going on” in the U.S., said Sara Senatore, a New York-based analyst at Sanford C. Bernstein & Co. “It’s probably going to some of their direct competitors, and it’s probably going to potentially some of the fast-casual” chains.

Burger King Worldwide Inc. recently started selling a 10-pack of chicken nuggets for $1.49, while Wendy’s Co. is touting pulled-pork sandwiches. McDonald’s newly appointed president for the U.S., Mike Andres, is working to simplify the chain’s menu and feature more locally relevant and customizable fare.

The shares fell 0.6% to close at US$91.01 in New York. McDonald’s slumped 5.6% this year through Monday’s close, while the Standard & Poor’s 500 restaurants index declined 3.8%.

McDonald’s global samestore sales slid 3.3% in the third quarter, also hurt by a backlash in China after a supplier was investigated for changing food expiration dates. Revenue dropped 4.6% to US$6.99-billion. Analysts projected US$7.19-billion.

Global comparable-store sales will fall in October, chief executive Don Thompson said in Tuesday’s statement.

“The internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter,” Mr. Thompson said in the statement. “These significant challenges call for equally significant changes in the way we do business.”

To win more diners, McDonald’s said it’s trying a new global strategy that includes investing in store remodels and technology as well as mobile ordering and payments.

Sales were hurt in China and Japan after a probe into meat supplier OSI Group LLC caused food shortages. The affected markets make up about 10% of consolidated revenue, McDonald’s said in August. The supplier issue reduced profit in the quarter by US15¢ a share.

The company also is facing pressure in Russia, where hundreds of its stores are being inspected by consumer-safety regulators. Russian courts have temporarily closed nine restaurants, McDonald’s said in a statement on its Russian corporate website. Closings there and in Ukraine reduced profit by US1¢ a share.