McDonald's Revenue Falls as Company Sells Restaurants to Franchisees
July 26 2018 - 9:00AM
Dow Jones News
By Heather Haddon
McDonald's Corp.'s revenue fell as the fast-food giant sold
company-owned stores to franchisees and operating income decreased
as it restructured its operations.
Revenue for the quarter totaled $5.35 billion, down from $6.05
billion a year earlier, but above the $5.32 billion analysts
expected. Operating income also decreased as a result of the
restructuring. Shares fell slightly in pre-market trading to
$158.
McDonald's has been eliminating layers of management to trim
costs and become more nimble. The plan involves providing more
support for franchisees, helping them manage expenses and figuring
out ways to boost sales. Previously, franchisees they were graded
by metrics such as restaurant cleanliness and service.
The Oakbrook, Ill.-based company said selling restaurants to its
franchisees hurt revenue, which fell 12% in the quarter. McDonald's
said it recorded a pretax charge of $92 million in the second
quarter because of employee severance costs and other costs
associated with closing field offices.
Still, McDonald's reported net income of $1.5 billion, or $1.90
a share including charges related to the restructuring, up from
$1.4 billion, or $1.70 a share, a year earlier. Analysts were
expecting earnings per share of $1.92.
Same-store sales grew 4% globally and 2.6% in the U.S. during
the quarter. U.S. sales missed analyst expectations of 3% growth,
and were partially driven by price increases, the company said.
McDonald's said last quarter that rising commodity costs around the
globe were pressuring the company to raise prices.
A new challenge for the company is finding a new supplier for
its salads for some 3,000 restaurants mostly in the Midwest, where
federal and state health officials are investigating a cyclospora
outbreak tied to McDonald's. The chain has pulled all of its salads
from those restaurants.
Competition at breakfast, which represents approximately 25% of
McDonald's sales, has also been a challenge for McDonald's. The
chain said in the first quarter that sales were hurt by
competitors' cheap breakfast offers. McDonald's in March began
offering two breakfast sandwiches for $4.
McDonald's said Thursday it gave $2.5 billion to shareholders
through share repurchases and dividends. The federal tax law
changes have given companies new sources of cash to boost its stock
through share repurchases.
--Julie Jargon contributed to this article.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
July 26, 2018 09:45 ET (13:45 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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