--Global same-store sales rise 7.5% in February; below analysts' expectations
--McDonald's says conomic issues are impacting 1Q operating income growth
--Shares drop 3.4% to $96.94; day's worst performer in DJIA and S&P 500
(Updates with additional information throughout.)
By Annie Gasparro and Melodie Warner
McDonald's Corp. (MCD) says its underwhelming sales growth in February could hinder its profit this quarter, as economic uncertainty in Europe and higher food costs in the U.S. curb consumers' appetitze for spending.
McDonald's shares were down 3.4% to $96.94 Thursday when the company reported that its global sales at restaurants open at least 13 months rose 7.5% in February, below the 8.15% same-store sales increase analysts surveyed by Consensus Metrix were expecting.
"The current operating environment includes persistent economic uncertainty, austerity measures in Europe and commodity and labor-cost pressures, particularly in the U.S.," McDonald's said in a statement. "These challenges are expected to impact the company's first-quarter operating income growth."
Over the past few years, McDonald's has been able to boost guest traffic and sales faster than most of its competitors as its increasingly diverse menu--ranging from value offerings to higher-margin products like blended-ice drinks--and growing global operations help it manage through the tough economy. McDonald's stock reached all-time highs in 2011--above $100--and was one of the highest performers of the Dow Jones Industrial Average, up 31% for the year.
Yet Thursday, it's stock drop made it the day's worst performer of both the Dow industrials and the S&P 500.
McDonald's said in January it expects commodity costs this year to rise 4.5% to 5.5% in the U.S. and 2.5% to 3.5% in Europe, with the most pressure in the first half of the year. As a result, it will likely push menu prices up--a sensitive issue for restaurants these days, given continued penny-pinching among consumers.
In addition to the economic headwinds, added pressures from foreign-currency translation and extra expenses are weighing on McDonald's profit outlook this year. The company said in January it estimates currency exchange will reduce its earnings by 16 cents to 18 cents a share this year, driven by a weaker euro, while it will also incur higher spending from a franchisee convention, the London Summer Olympics and technology initiatives this year.
The bright spot of its latest sales data is at home. In February, McDonald's U.S. same-store sales rose 11.1%, topping analysts' growth estimate of 8.59%, reflecting strong demand for its new Chicken McBites popcorn chicken and Filet-O-Fish promotions.
In Europe, same-store sales grew 4%, short of the analysts' forecast for a 6.64% increase. McDonald's attributed the shortfall to severe winter weather in certain markets.
The Asia/Pacific, Middle East and Africa region posted a 2.4% increase while analysts projected an 8.11% rise. Strong Australia sales were somewhat offset by Japan and the shift of the Chinese New Year to January.
McDonald's February system-wide sales rose 9.4%, or 9.7% in constant currencies.
-By Annie Gasparro and Melodie Warner, Dow Jones Newswires; 212-416-2244; firstname.lastname@example.org