Friday, August 3

McDonald's shares fall after earnings upset

Bryan Elliott, Raymond James, and Matthew DiFrisco, Lazard Capital Markets, break down McDonald's lower-than-expected quarterly numbers, hurt by a slowing global economy and stronger dollar.

McDonald’s shares fell 2.5 percent to $89 Monday after the fast-food company’s chief executive said lower-than-expected quarterly earnings “reflected the slowing global economy [and] persistent economic headwinds.”

The world’s biggest fast-food chain company said weak consumer demand and the hindrance from the stronger U.S. dollar hurt business. A stronger dollar reduces the value of sales overseas for U.S. companies.

“You are starting to see signs that consumers are spending less at restaurants,” said Morningstar analyst R.J. Hottovy. “You are also seeing increased competition.”

McDonald’s net income fell to $1.35 billion during the second quarter, down 4 percent from $1.41 billion reported in the same quarter the year before. The restaurant chain said it expects same-store sales to go up in July, but less than they did in the second quarter.

“While the environment has become more challenging, we continue to see significant opportunities to further differentiate and grow the McDonald’s brand,” McDonald’s Chief Executive Officer Don Thompson said.

“We have the resources and discipline to invest for the long-term benefit of our System and our shareholders,” he added.

The broader stock market tumbled Monday, with the Dow sinking sharply, amid fears about the stability of key European economies as the region’s debt crisis intensifies.

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