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McDonald’s 3Q profit rises, revenue misses Street

McDonald’s third-quarter profit rose 5 percent as world’s biggest hamburger chabenefited from Monopoly promotiU.S. strength U.K. Russia. | AP file

McDonald’s third-quarter profit rose 5 percent, as the world’s biggest hamburger chain benefited from a Monopoly promotion in the U.S. and strength in the U.K. and Russia. | AP file photo

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Updated: October 26, 2013 12:31PM



OAK BROOK — McDonald’s third-quarter profit rose 5 percent, as the world’s biggest hamburger chain benefited from a Monopoly promotion in the U.S. and strength in the U.K. and Russia.

But revenue missed analyst expectations and shares slid more than 2 percent in premarket trading.

After outperforming rivals for years, McDonald’s has struggled recently as it faces heightened competition, shifting eating habits and tough economic conditions around the world. Late last year, its monthly sales at stores open at least a year fell for nearly the first time in a decade.

“Our results reflect McDonald’s ability to grow amid the broad-based challenges of the current environment by focusing on those areas of the business within our control,” said CEO Don Thompson.

For the three months ended Sept. 30, net income rose to $1.52 billion, or $1.52 per share. That compared with $1.46 billion, or $1.43 per share, last year. Analysts expected $1.51 per share, according to FactSet.

Revenue rose 2 percent to $7.32 billion from $7.15 billion last year. Analysts expected $7.33 billion.

McDonald’s, based in Oak Brook, Ill., said sales in stores open at least 13 months rose 0.9 percent, including a 0.7 percent rise in the U.S. and a 0.2 percent rise in Europe. The measure, considered important because it gauges growth at continuing locations after stripping out recently opened and closed stores, fell 1.4 percent in the Asia/Pacific, Middle East and Africa regions.

U.S. results benefited from its Monopoly game and the introduction of Mighty Wings as a national limited time offer.

Looking forward, McDonald’s expects fourth quarter sales in stores open at least 13 months will be on par with the third quarter’s 0.9 percent rise.

“While we are focused on strengthening our near-term performance, the current environment continues to pressure results,” Thompson said.

To push up sales, the company has been taking a two-pronged approach. On the one end, it’s playing up its Dollar Menu and other affordable options to draw in customers who may be watching their spending more carefully. The strategy has forced rivals Burger King and Wendy’s to more aggressively push deals and promotions as well. Some analysts have worried that the strategy could eat into profit margins and indeed, McDonald’s said margin percentages are expected to continue to decline in the fourth quarter.

At the same time, McDonald’s is also trying to adjust its image and menu to better reflect shifting eating habits. In the U.S., for example, the company recently rolled out chicken wraps and the option to substitute egg whites in any of its breakfast sandwiches. Early next year, it also said it will start giving customers the option to pick a salad instead of fries with their value meals.

McDonald’s has more than 34,000 locations around the world.



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