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McDonald's profits slip on weaker sales

Tuesday, July 22 16:01:16

Quarterly profit at McDonald's fell more than expected after established restaurants in its struggling U.S. division turned in a third straight quarterly sales decline and results from Europe also logged a surprise drop.

Weakness in the world's biggest hamburger chain's two top markets, coupled with its warning of a global fall in same-restaurant sales for July, also helped send McDonald's shares down 1.1 percent in early trading today.

McDonald's gets about 30 percent of its revenue from the United States, where sales at restaurants open at least 13 months fell 1.5 percent in the second quarter. Traffic remained depressed amid tough competition from a range of rivals, which include Wendy's Co, Burger King Worldwide Inc and privately held Chick-fil-A.

Analysts had expected McDonald's U.S. comparable sales to fall just 0.3 percent, according to research firm Consensus Metrix.

McDonald's results stood in sharp contrast to Chipotle Mexican Grill Inc, which on Monday reported a 17.3 percent jump in same-restaurant sales at its predominantly U.S. burrito restaurants.

McDonald's said ongoing weakness in Germany was partly to blame for the 1 percent same-restaurant sales decline in Europe, which just beats out the United States as the fast-food chain's top revenue market. Analysts had expected a gain of 0.7 percent, according to Consensus Metrix.

The Asia-Pacific, Middle East and Africa (APMEA) region rose 1.1 percent. The results got a boost from China, which just recovered from food safety and bird flu scares but now is embroiled in a new controversy over a major supplier's meat handling methods.

Still, the region's results were light compared with analysts' call for a rise of 1.5 percent.

Second quarter net income fell almost 1 percent to $1.39 billion, or $1.40 per share, missing analysts' average profit estimate by 4 cents per share, according to Thomson Reuters I/B/E/S.

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