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Retailers, consumers and prices
Check Out Line: Weak euro to take bite out of McDonald’s too
Check out the weak euro’s latest victim.
McDonald’s reported better-than-expected global sales in May at stores open at least 13 months, but warned that full-year profits would be hit by unfavorable currency exchange rates, specifically calling out the euro.
The No. 1 hamburger chain gets about one quarter of its operating income from the euro zone, and that region will result in foreign exchange rates hurting the full-year profit instead of being slightly positive as it previously forecast. However, the company said that issue would not affect second-quarter results and the European stores posted far stronger-than-expected May sales, so the real impact of the weak euro is still to come.
It’s been a mixed bag of late for McDonald’s, which recently recalled at least 13.4 million “Shrek”-themed drinking glasses in the United States and Canada due to the presence of toxic metal cadmium in the designs.
Euro worries don’t just apply to McDonald’s. Rival Burger King on Monday warned that unfavorable exchange rates, primarily related to the euro, would reduce the profit in the current quarter by 1 to 2 cents a share.
The euro hovered near a four-year low against the dollar on concerns over a widening European debt crisis that has struck financial markets.
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Check Out Line: Upset tummies in the food sector?
Check out sluggish results in the U.S. food sector.
Fast food giant McDonald’s and Kroger, the largest U.S. grocery chain, saw shares decline 2.5 percent and 10 percent, respectively, after reporting weak results.
McDonald’s said same-store sales at its U.S. restaurants slipped 0.6 percent in November, marking the second straight monthly decline. Following Yum Brands’ recent weaker-than-expected sales, it was the latest sign that the fast-food sector that had performed well through most of the recession was weakening.
Rising unemployment has begun to take a noticeable bite out of sales, particularly at breakfast — where McDonald’s leads the industry.
Kroger reported a much lower-than-expected quarterly profit and cut its full-year forecast as it feels pressure from falling food prices and stepped up competition.
Not everything was dark at the dinner table.
Chicken producer Sanderson Farms posted a quarterly profit compared with a year-ago loss as it benefited from higher poultry prices and lower feed costs. To wash that news down, alcoholic beverage maker Brown-Forman posted a higher quarterly profit and raised its outlook for the current fiscal year.
Check Out Line: Slurping up strong sales at McDonald’s
Check out those sales rising at fast-food giant McDonald’s.
The burger chain said its April sales at restaurants open at least 13 months rose 6.9 percent rise in April. In the U.S. alone, April same-store sales increased 6.1 percent, helped by new coffee drinks and chicken snack wraps.
Fast-food restaurants have generally held up better in the recession than higher-priced sit-down restaurants.
But even fast-food sellers have not been immune to the impact of the downturn. The U.S. fast-food industry saw its first quarterly traffic decline since 2003 in the quarter ended in February, according to market research company NPD Group.
The stronger dollar, which lessens the dollar-value of sales made overseas, led to an overall 1 percent decline at worldwide McDonald’s restaurants, the company said. Sales rose 8.9 percent in constant currencies.
Same-store sales rose 8.4 percent in Europe, helped by the shift of the Easter holiday to April from March, while same-store sales in the company’s Asia/Pacific, Middle East and Africa segment rose 6.5 percent.
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