McDonald’s suffers drop in profits

- Last updated on GMT

McDonald’s suffers drop in profits
McDonald’s suffers drop in profits

Related tags: Global comparable sales, Economics

Burger giant McDonald’s has seen net profits fall 4% year-on-year in the second quarter of 2012, reflecting a strong dollar and challenging global trading conditions.

The company reported that net income totalled $1,347m in the quarter ended 30 June, done from $1,410m during the same period last year. However, sales increased by 3.7%, with gains in all the major markets, and total revenue was flat at $6.9bn.

“McDonald’s global comparable sales remained solid for the quarter while overall results reflected the slowing global economy, persistent economic headwinds and the investments we’ve made to enhance restaurant operations and provide customers the everyday value they have come to expect from McDonald’s,”​ said McDonald’s chief executive officer Don Thompson.

The biggest growth was seen in Europe, which recorded a 3.6% sales increase as a result of strength in the UK and Russia, with France and Germany also contributing, although these countries were “feeling a pressure of the ongoing Eurozone difficulties,”​ Thompson told investors.

The US generated comparable sales growth of 3.6% for the quarter, with a 2% increase in operating income. “The US continues to build sales and guest counts. However, it is happening at a slower pace amid an unpredictable economic environment and increased competition,”​ said Thompson.

The Asia/Pacific, Middle East and Africa (APMEA) region saw relatively flat sales (+0.9%), with strong growth in Australia and China weakened by poor performance in Japan. “Japan continues to grapple with a difficult economy coupled with ongoing disaster recovery and anticipation of energy restrictions. This is taking a toll on consumers who are now eating more meals at home,”​ Thompson explained.

Looking to the future, Thompson told investors that global comparable sales for July are expected to be positive, but less than the second quarter.

“We’re experiencing stronger headwinds on both the top and bottom lines,”​ he said. “Some of the headwinds are macroeconomic, such as declining consumer settlement and higher commodity and labour costs. Other pressures are the result of planned strategic decisions we’ve made to grow the business.”

He said that the company was “on course​” to build over 1,300 new restaurants in emerging markets such as China, Brazil, India and Russia, as well as in established markets such as the US, France, Germany and Australia.

McDonald’s has a resilient business model, strong system alignment around the Plan to Win and experience in a variety of economic cycles. While the environment has become more challenging, we continue to see significant opportunities to further differentiate and grow the McDonald’s brand. We have the resources and discipline to invest for the long-term benefit of our system and our shareholders,”​ he concluded.

Related topics: Meat

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