McDonald’s second-quarter earnings beat Wall Street estimates, but U.S. sales cooled more than expected and revenue tumbled 12 percent, the company said in announcing its results Thursday.
A lower effective tax rate helped the company squeeze out more earnings than analysts projected in an otherwise tough quarter marked by a nationwide recall of salads at about 3,000 of its restaurants across the U.S.
Public health officials have traced an outbreak of Cyclosporiasis back to lettuce tainted by the Cyclospora parasites, which is transmitted in fecal matter. The Centers for Disease Control said last week that it’s traced at least 163 cases across 10 states back to McDonald’s.
Sales at company-owned restaurants plunged by 27 percent during the second quarter and sales at U.S. locations that have been open at least a year grew at a slower-than-anticipated rate of 2.6 percent. Wall Street analysts were expecting growth of 3 percent, according to StreetAccount.
A jump in international sales, especially in the U.K. and France, helped bolster the company’s results.
Shares of McDonald’s were about flat in pre-market trading Thursday after the company posted better-than-expected second-quarter earnings.
Here is what the company reported versus what Wall Street expected:
- Adjusted earnings: $1.99 per share vs. $1.92 per share expected by analysts polled by Thomson Reuters.
- Revenue: $5.35 billion vs. $5.32 billion expected by analysts polled by Thomson Reuters.
- Same-store sales: 4 percent growth vs. 3.5 percent expected, according to StreetAccount.
Net income rose to $1.49 billion, or $1.90 per share, from $1.39 billion, or $1.70 per share, a year earlier. Excluding a $92 million restructuring charge and other one-time expenses, McDonald’s earned $1.99 per share, better than the $1.92 per share analysts had expected, according to Thomson Reuters.
McDonald’s revenue dropped 12 percent to $5.35 billion, from $6.05 billion during the same three months last year. The company attributed the drop to its strategic refranchising initiative, which reduces revenue as it moves to decrease the percentage of company-operated stores from 8 percent to 5 percent. The rent and royalty payments McDonald’s gets from franchisees are less than it would receive on food sales at its own restaurants, but so are its costs.
“We’re pleased with the results of our international business and the progress we’re making in the U.S. on executing on our Velocity Growth Plan priorities,” Steve Easterbrook, CEO of McDonald’s said in a statement.
Same-store sales, a key metric for restaurant companies, were up 4 percent globally, higher than the 3.5 percent analysts had expected according to StreetAccount.
It’s been more than a year since the company’s executives touted several big changes that the chain would be making to win back the more than 500 million visits it lost since 2012. This included innovating its menu, renovating its stores, offering mobile and kiosk ordering and partnering with UberEats to test delivery.
The company’s stock hit a record high of nearly $179 per share earlier this year, but it closed Wednesday at $158.89. Shares are down nearly 8 percent since January.