By Savyata Mishra
(Reuters) -McDonald’s on Tuesday posted a steeper-than-expected drop in quarterly global comparable sales, hurt by weaker traffic across its key markets even as it intensified promotions to woo back customers after several years of price hikes.
Net income fell to $2.26 bln, down 3% from the year-ago period. The Chicago-based company earned $3.23 per share on an adjusted basis in the quarter, compared with last year’s $3.19. It was not immediately clear if that was directly comparable to the $3.20 analysts expected.
Global sales fell 1.5% in the third quarter, the biggest decline in four years, compared with analysts’ average estimate of a 0.72% fall, according to data compiled by LSEG.
Shares of the company were down more than 1% before the bell. They had declined nearly 7% last week following an E. coli outbreak linked to its Quarter Pounder hamburgers, that has infected 75 people and killed at least one person.
The fast-food chain has been hit by slowing customer visits across the U.S., Europe and China as price-conscious shoppers looked for cheaper meal fixes and cooked more at home.
The sluggish demand has prompted fast-food chains including Wendy’s, Burger King and Taco Bell to lean into meal bundles and limited-time offers in a bid to revive traffic, especially among lower-income customers.
McDonald’s CEO Chris Kempczinski said the company was focused on affordability as customers continue to be mindful about spending.
Last week, McDonald’s temporarily paused serving Quarter Pounders in a fifth of its 14,000 U.S. restaurants, following an E. coli outbreak that has infected 75 people and killed at least one person.
Slivered onions used in the hamburgers are likely to be the source of the infection, with the Colorado Department of Agriculture over the weekend ruling out beef patties as the possible cause.
Customer visits in the U.S. fell 6.4%, 9.1% and 9.5% year-over-year on October 23, 24 and 25, respectively, according to a Gordon Haskett note. The company’s conference call on earnings is expected to focus on any fallout from the outbreak.
U.S. comparable sales grew 0.3% in the quarter ended Sept. 30, reversing the previous quarter’s drop, partly aided by a $5 meal deal which has been extended into December at most McDonald’s locations.
Sales in international markets fell 2.1%, driven by weakness in France and Britain, compared with estimates of a 1.21% drop.
Weaker consumer spending in China and impacts of the Middle East conflict have dented McDonald’s business segment where restaurants are operated by local partners, with sales dipping 3.5% compared with a 10.5% rise a year earlier.
Western fast-food chains such as McDonald’s and Starbucks have seen boycott campaigns over their perceived pro-Israeli stance and alleged financial ties to Israel.
In April, McDonald’s bought its 30-year-old Israel franchise from Alonya, taking back ownership of 225 restaurants in the country that employs more than 5,000 people.
(Reporting by Savyata Mishra in Bengaluru; Editing by Leslie Adler and Nick Zieminski)
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