McDonald’s Drops on Forecast Currency Fluctuations Will Hurt 2012 Profit
McDonald’s Profit Increases as U.S. Same-Store Sales Gain
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The Ronald McDonald balloon floats in Macy's Legendary Thanksgiving Day Parade in New York.
The Ronald McDonald balloon floats in Macy's Legendary Thanksgiving Day Parade in New York. Photographer: Ben Hider/Getty Images
McDonald’s Corp. (MCD), the world’s largest restaurant chain, fell the most in more than four months as it forecast foreign-currency fluctuations would reduce profit this year.
The shares fell 2.2 percent to $98.75 at the close in New York, the biggest decline for the Oak Brook, Illinois-based company since Sept. 9. The shares gained 31 percent last year.
McDonald’s, which gets about 60 percent of its revenue outside the U.S., said profit may be trimmed as the European debt crisis sinks the region’s currency. Foreign-exchange fluctuations may cut 2012 profit by as much as 18 cents a share and first-quarter earnings by as much as 3 cents, Chief Financial Officer Peter Bensen said today on a conference call.
“The one thing that concerns investors right now on this name is on the currency side,” Peter Saleh, a restaurant analyst at Telsey Advisory Group in New York, said in an interview. He had estimated currency fluctuations would reduce McDonald’s profit by about 12 cents a share this year, and “if the dollar strengthens, it could get worse,” he said.
Profit this year may be $5.73 a share, the average estimate of 25 analysts surveyed by Bloomberg. McDonald’s doesn’t provide annual earnings forecasts.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, gained 7.6 percent in the past six months. The euro has sunk 9.3 percent against the dollar in that time.
Profit Gains
Fourth-quarter net income rose 11 percent to $1.38 billion, or $1.33 a share, from $1.24 billion, or $1.16, a year earlier, the company said in a statement today. Analysts projected $1.30 a share, the average of 24 estimates compiled by Bloomberg. McDonald’s said foreign-currency translation had no effect on earnings for the quarter.
Chief Executive Officer Jim Skinner has sought to draw U.S. consumers with value-priced items on the Dollar Menu and limited-time offers, such as the McRib sandwich. The restaurant is promoting a snack portion of Chicken McBites this month for $1.99 as U.S. consumer confidence continues to rise from a two- and-a-half year low.
The restaurant, along with other food sellers, has raised menu prices to help recoup higher raw ingredient costs. McDonald’s most recent U.S. price increase -- less than 1 percent -- was in November, Bensen said during the call.
“Where warranted, we will strategically take increases to offset some, but not all, of our higher costs,” he said.
Commodity Forecast
McDonald’s repeated a forecast that commodity costs will rise as much as 5.5 percent in the U.S. and as much as 3.5 percent in Europe in 2012.
Margin at company-operated locations narrowed to 18.7 percent in the quarter, from 19 percent a year earlier, the company said in a filing. Revenue increased 9.8 percent to $6.82 billion, matching analysts’ estimates.
McDonald’s had 33,510 stores globally, more than 80 percent of which were franchise operated, as of Dec. 31. The company will spend $2.9 billion this year to open 1,300 new restaurants and remodel 2,400 locations.
To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
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