McDonald’s (NYSE:MCD) net profit in the second quarter rose 3.7% to $1.4 billion, while sales were up 2.4% to $7.08 billion, results below analysts’ estimates, as the company warns that the difficult economic situation will continue to affect business for the rest of the year.
Shares of the fast food chain closed Monday on the New York Stock Exchange down 2.7%, the steepest decline in the last nine months, according to Bloomberg. From the beginning of the year, McDonald’s shares climbed 11%, while the S & P 500 index of the restaurants sector rose 16%. The company is trying to attract more customers by lowering prices in the U.S. and Europe. McDonald’s sales for restaurants that were open for at least 13 months rose by 1%, in line with analysts’ expectations.
“There are folks for whom it’s an economic decision to go to McDonald’s, and they’re not going,” said Bryan Elliott, an Atlanta-based analyst at Raymond James Financial Inc. He added: “We need to see a meaningful rise in purchasing power” among McDonald’s customers.
For July, the company estimated that sales will stagnate over the same period last year. Also, McDonald’s warns that the results will continue to be negatively impacted this year by the difficult economic conditions. The company also said that the results were limited by the depreciation of foreign currencies against the dollar, a trend which will continue to negatively affect profits in the rest of the year.
In the U.S., the company’s business was affected by the low level of consumer confidence, as the unemployment rate is relatively high since 2008. Also, the company’s competitors in the U.S. market launched new products and started aggressive pricing strategies, such as the $1 menu at Taco Bell.
In Europe, where purchasing power is declining in some markets, the company has promoted the cheapest products on the menu, but sales fell and continue to fall this year as a whole.
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