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McDonald’s Profit Little Changed as U.S. Store Sales Decline

McDonald’s Corp. (MCD), the world’s largest restaurant chain, posted fourth-quarter profit that was little changed from a year earlier as U.S. same-store sales fell amid shaky consumer confidence and increased competition.

Net income was about $1.4 billion, or $1.40 a share, compared with $1.4 billion, or $1.38, a year earlier, the Oak Brook, Illinois-based company said in a statement today. Analysts estimated $1.39 a share, the average of 27 projections compiled by Bloomberg.

Chief Executive Officer Don Thompson has been advertising the chain’s new Dollar Menu & More, which has items priced at $1 and $2, to lure Americans amid falling consumer confidence. The company, which in 2012 got 32 percent of revenue from the U.S., also is facing heightened competition as Burger King Worldwide Inc. (BKW) and Wendy’s Co. sell more lower-priced sandwiches.

“They need a real improvement in the overall economy, where we get a little bit of inflation and incomes start to rise and they feel like they can raise prices a little bit,” Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in a phone interview.

Sales at McDonald’s U.S. locations open at least 13 months fell 1.4 percent in the quarter. Analysts estimated a drop of 0.2 percent, the average of 23 estimates from Consensus Metrix. January comparable-store sales are expected to be unchanged globally, Thompson said in the statement.

Photographer: Michael Nagle/Bloomberg

Customers order from a walk up window at a McDonald's Corp. restaurant in New York. Close

Customers order from a walk up window at a McDonald's Corp. restaurant in New York.

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Photographer: Michael Nagle/Bloomberg

Customers order from a walk up window at a McDonald's Corp. restaurant in New York.

McDonald’s rose 0.5 percent to $95.32 at the close in New York. The shares gained 10 percent last year, while the Standard & Poor’s 500 Restaurants Index advanced 23 percent.

Rivals’ Menus

Burger King in November announced it was selling a new barbecue rib sandwich for $1, while Wendy’s last month started selling 99-cent spicy chipotle burgers and chicken sandwiches. McDonald’s last year didn’t advertise its McRib sandwich nationally, leaving the decision up to franchisees. Instead, it touted new chicken wings, McWraps and coffee flavors.

“It’s just going to be tough because the competitors have gotten a lot better,” Sara Senatore, a New York-based analyst at Sanford C. Bernstein & Co., said in an interview. “It would be great if they could come up with a killer product.”

Consumer confidence in the U.S. unexpectedly declined in January, a sign spending may take time to accelerate in 2014. The Thomson Reuters/University of Michigan preliminary index of sentiment fell to 80.4 from 82.5 in December.

Global Sales

McDonald’s same-store sales fell 0.1 percent globally in the quarter. Analysts estimated a 0.5 percent increase, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group. Comparable-store sales advanced 1 percent in Europe and declined 2.4 percent the company’s Asia Pacific, Middle East and Africa region. Same-store sales are considered an indicator of a company’s growth because they include only older, established locations.

The burger chain is focused on improving results in Germany, Japan, the U.S. and Australia, Thompson said during a conference call with analysts today.

Revenue rose 2 percent to $7.09 billion in the quarter, trailing analysts’ estimate of $7.11 billion, on average.

The company has more than 34,900 restaurants worldwide and 81 percent of those are franchised. McDonald’s plans to open as many as 1,600 new stores this year and remodel more than 1,000.

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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