The trend of a positive turnaround in the business of the fast-food restaurant chain McDonald’s seems to subside.
During the second fiscal quarter net profit of the company increased by 9% to just under $1.09 billion, or $1.25 per share, reported Bloomberg. Revenue fell by 4% to $6.26 billion. Analysts were expecting a lot more – a profit of $1.38 per share and revenue of $6.27 billion.
On Wall Street, the news was not well received, and the shares of McDonald’s depreciated by over 3 percent after the announcement of the results.
For some time, McDonald’s is trying to cope with the trends in healthy eating, as well as strong competition from Starbucks, Burger King and Wendy’s. Today the company said it faces a challenging environment in several markets.
After several months of a crisis at the beginning of the year, McDonald’s managed to attract significantly more customers in its fast food restaurants. Primarily in the highly competitive domestic market, the Group managed to raise points of its all-day breakfast menu and new, cheaper offers.
But in the past quarter, the influx of customers is weakening again, and US sales of the established branches – institutions that operate for at least 13 months, rose by a modest 1.8 percent on an annual basis. Globally, sales grow by 3.1 percent – also lower than expectations for growth of 3.6%, according to FactSet.
“We believe the industry has at least 18 months of challenges ahead in terms of softer [same-store sales] and higher labor costs because of capacity growth and labor tightness, a year after the stock peak in summer ’15,” said in a research note Andy Barish, analyst at Jefferies.