The Low Post News

Profit at McDonald’s Falls

Hamburger chain giant McDonald’s posted on Tuesday a lower profit for the quarter as the high cost of beef bit its margins and fewer customers visited the restaurants resulting in a decline in sales that was bigger than had been expected at the burger chain’s established restaurants in the U.S.

McDonald’s has now registered close to two years of choppy sales at restaurants in the U.S. that have been opened a minimum of 13 months because of sluggish growth in the economy, internal missteps that slowed service and complicated menus, and stiffer competition.

Don Thompson the CEO who likely will come under additional pressure to improve results at McDonald’s is just two years into his reign. He said that he is expecting restaurant sales in same restaurants to be modestly positive in April.

Still, the year promises to be challenging as the company battles with record high prices for beef, increases in labor costs, protests for workers making minimum wage and an aggressive competition from the likes of Taco Bell for its breakfast business.

The restaurants that have been opened at least 13 months saw sales fall by 1.7% during the first three months of 2014 in the U.S. That figure was lower than analysts had predicted on Wall Street, which was a drop of 1.4%.

This is the sixth consecutive quarter McDonald’s has missed projections from Wall Street. Analysts on Wall Street have warned that improvement at McDonald’s could be slow.

One analyst said that the domestic business of McDonald’s was hampered due to a menu that was far too cluttered, which has slowed down service times.

Slow service, said the analyst, likely will stunt the efforts to improve the overall traffic by running more customers through its restaurants. Quick service is the key to the success of fast-food chains.

Elsewhere the largest restaurant chain in the world by revenue saw better numbers. Global sales of comparable stores were up by 0.5% during the quarter, helped by increased in Europe where sales were 1.4% higher, which was slightly better than the forecast by analysts of 1.2%.

Africa, the Middle East and Asia Pacific saw same restaurant sales increase by 0.8%, compared to projections by analysts of 0.5%.

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