McDonald's blames economy as sales stall in July

McDonald's key sales figure flat in July; hamburger chain points finger at weak economy

Associated Press

NEW YORK (AP) -- The Golden Arches are starting to lose some of their shine.

McDonald's Corp. says a key revenue figure came in flat in July as diners pulled back amid a tough economy. After years of outperforming expectations, even through the recession, the stall is the latest sign that the world's biggest hamburger chain is starting to feel the effects of the global economic volatility.

In the U.S., the company said its promotions failed to drive growth, and revenue at restaurant open at least 13 months dipped 0.1 percent. The Oak Brook, Ill.-based company also says it faced a tough comparison from a year ago, when it launched the mango pineapple smoothie.

The figure dipped 0.6 percent in Europe because of weakness in Germany and several Southern European markets. It fell 1.5 percent in the Asia Pacific, Middle East and Africa region — a key growth area for McDonald's.

Sales in Latin America and Canada, which are not reported separately, helped pull overall results even with last year.

Revenue in restaurants open at least 13 months is a key measure of a restaurant chain's performance because it excludes the impact of recently opened or closed stores. It does include the company's temporarily closed restaurants.

The figures are a snapshot of money spent on food at both company-owned and franchised restaurants. They do not reflect corporate revenue.

In economically hard-hit regions, McDonald's has been working to emphasize the value of its meals to get penny-pinching consumers to eat out more often. The company noted last month that in Europe, which accounts for 40 percent of its business, guest traffic was down in several regions.

With more than 33,500 restaurants around the world, McDonald's is seen as a bellwether for the industry.

The fast food chain has exceeded expectations in recent years in large part by emphasizing value and continually evolving its menu to keep up with changing tastes. Some of its most successful new offerings in recent years — such as snack wraps and specialty coffees — give customers a way to treat themselves for just a few bucks. They also happen to have high profit margins.

But now the company is also facing stiffer competition from newcomers such as Panera Bread Co. and old rivals such as Burger King Worldwide Inc. and Wendy's Co., which are revamping their menus and marketing to win market share. Last week, Miami-based Burger King said that revenue at established restaurants rose 4.4 percent in the second quarter.

Wendy's is set to report its quarterly results Thursday.

McDonald's said last month said its net income fell 4 percent in the second quarter as unfavorable currency exchange rates and high costs ate into profits.

Shares of McDonald's fell $2.64, or 3 percent, to $86.37.

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