McDonald’s Second Quarter Profits Decline Due to Sluggish Economy

McDonald's Second Quarter Profits Decline Due to Sluggish Economy

McDonald’s Corporation (NYSE:MCD), the world’s largest chain of fast-food restaurants, reported a second quarter net profit of $1.35 billion, or $1.32 per share, down from $1.41 billion a year earlier. The company said it was badly affected by the global economic downturn and strengthening US dollar – which reduces the value of overseas sales. The strong dollar alone reduced earnings by 7 cents per share, MacDonald’s said.

Total sales increased slightly from $6.91 billion to $6.92 billion. Analysts were expecting $1.37 earning per share and total sales of $6.94 billion.  The same restaurant’s sales grew 3.6 percent in the US and 3.8 percent in Europe. MacDonald’s considers emerging markets – Asia/Pacific, Middle East, and Africa region, as key drivers of growth, but sales in these regions remained almost flat, growing at just 0.9 percent. The results clearly show that people are cutting a lot on discretionary spending.

MacDonald’s rarely misses the market estimates. Under the leadership of CEO Jim Skinner, the company’s profits and sales have been growing for over a decade. He refreshed the menus and stores, forayed into key growth driving markets; therefore investors and analysts always have high expectations from the world’s largest hamburger chain.

In the last 10 years, the company’s share prices have increased 280 percent, and grew a record 63 percent in the last three years, despite the slow economic recovery. Its competitors – Wendy’s, Burger King Holdings, Inc. (NYSE:BKC), and Panera Bread Co (NASDAQ:PNRA), have been left far behind. The sales of Chipotle are also cooling rapidly.

MacDonald’s share prices declined 2.1 percent in premarket trading to $89.65. Mark Kalinowski, analyst at Janney Capital, said he would maintain the Buy rating for the company. “Our Buy rating is driven by impressive-same store sales trends in the U.S., which we believe are attributable to best-in-class store level execution,” he told Forbes. “We believe that McDonald’s will continue to grab additional market share in all three major geographies, helping the stock over time.”

About the Author

Vikas Shukla
Although he has a background in finance and holds an MBA, Vikas Shukla is a technology reporter. He has a strong interest in gadgets, gizmos, and science. He writes regularly on these topics. - He can be contacted by email at