July 24, 2012 in Business

Tough economy eats into McDonald’s income

Associated Press
 
Shares fall

McDonald’s shares fell $2.64, or almost 3 percent, to close at $88.94 Monday.

NEW YORK – Not even McDonald’s Corp. has an iron stomach when it comes to the global economic downturn.

The world’s largest hamburger chain has thrived in boom and bust times by selling cheap eats and constantly updating its menu. But the company is starting to show signs of wear and tear from global economic pressures, intensifying competition and penny-pinching customers who are eating out less often in some hard-hit regions around the world.

The Oak Brook, Ill.-based company said Monday that its net income fell 4 percent in the second quarter as a strong dollar ate into results.

When the dollar is strong, international sales translate into fewer dollars back at home. That’s problematic for McDonald’s, which does two-thirds of its business overseas. Making matters worse, the dollar hit a two-year high against the euro Monday.

McDonald’s is also facing higher costs for labor and ingredients, although it said it now expects commodity costs to rise between 3.5 percent and 4.5 percent for the full year, down from the previous forecast of up to 5.5 percent.

Suggesting more challenges ahead, McDonald’s said global sales at restaurants open at least a year rose 3.7 percent for the three months ended June 30. The figure represents the slowest growth since the company reported sales growth of 2.3 percent in the fourth-quarter of 2009.

“We’ve been in situations like this before,” CEO Don Thompson said in a conference call with investors, noting that the company will draw on its past experiences to navigate the current challenges.

© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email