McDonald’s on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations as its U.S. restaurants reversed last quarter’s same-store sales decline.
The earnings report didn’t mention the recent E. coli outbreak across 13 states that’s been linked to McDonald’s Quarter Pounder burgers. CEO Chris Kempczinski is expected to address the situation for the first time on the company’s conference call with investors at 8:30 a.m. ET.
Shares of the company fell more than 2% in premarket trading.
Here’s what the company reported for the period ended Sept. 30, compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $3.23 adjusted vs. $3.20 expected
- Revenue: $6.87 billion vs. $6.82 billion expected
McDonald’s posted third-quarter net income of $2.26 billion, or $3.13 per share, down from $2.32 billion, or $3.17 per share, a year earlier.
Excluding certain items, the fast-food giant earned $3.23 per share.
Net sales rose 3% to $6.87 billion.
However, the chain’s global same-store sales fell 1.5%, a more drastic decline than the 0.6% that Wall Street was expecting, according to StreetAccount estimates, and was weighed down by the company’s international markets.
U.S. same-store sales rose 0.3%, reversing last quarter’s same-store sales declines but still slightly weaker than the 0.5% increase predicted by StreetAccount estimates. Traffic to its U.S. restaurants was slightly negative, but the company credited its marketing and a $5 value meal launched in late June for the increase in sales.
Diners have pulled back their restaurant spending, leading McDonald’s and its rivals to lean into discounts and other marketing tricks to bring customers back to their restaurants. For example, in August, McDonald’s launched limited-time “Collector’s Edition” cups.
The company’s two international divisions both reported steeper declines in same-store sales compared with the prior quarter. The international operated markets segment, which includes France, Germany and Australia, saw same-store sales shrink 2.1%. The international developmental licensed markets division reported same-store sales declines of 3.5%, driven by weak demand in the Middle East and China.
Looking ahead to the fourth quarter, it’s unclear how the E. coli outbreak might affect U.S. sales, particularly as consumers have grown more picky about how to spend their money and where.
McDonald’s executives have taken steps to reassure customers that the company’s menu items are safe to eat, including pulling Quarter Pounder burgers from menus in the affected areas until its beef patties were cleared as the culprit. Health authorities have zeroed in on the menu item’s slivered onions as the likely source of the outbreak, and McDonald’s plans to serve Quarter Pounders without the ingredient at roughly 900 restaurants after suspending its relationship with the supplier, Taylor Farms.
Still, foot traffic to U.S. locations fell roughly 10% in the three days immediately following the Centers for Disease Control and Prevention announcement last Tuesday of the E. coli outbreak tied to McDonald’s, according to a research note from Gordon Haskett Research Advisors.
This story is developing. Please check back for updates.
