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Retail Environment Remains Challenging: McDonald's CEO

Macro factors in the U.S. and Europe are creating a challenging environment for retailers, although these strains may ease later this year, said McDonald's president and CEO Don Thompson on CNBC's "Squawk on the Street." Thompson spoke with CNBC exclusively from McDonald's innovation center in Romeoville, Illinois.

"I think what we're seeing relative to the U.S. is that we've seen the starts and stops of a recovery," Thompson said. "But you have to take it with a grain of salt. As long as employment is at a high rate and with skittish consumer confidence, this will remain a challenging retail environment."

Although Thompson said that it "remains to be seen" whether employment is truly back on track, McDonald's has increased hiring for its late night and breakfast shifts. "We always plan for the environment we're in," he said. "Right now, we don't expect to get the benefit of a resurgent economy."

In Europe, Thompson said that not all countries on the continent are "homogeneous" and some areas are actually showing strength, despite the overall weak picture. "The UK for us, Russia have been fairly strong markets, but across Europe you have a pretty mixed bag. We think Europe is going to be a much longer recovery," he said.

With approximately 160 items on the global pipeline, Thompson said that this will help drive McDonald's growth, driving traffic and same store sales. Many of the new products seen by American consumers, such as the Blueberry Pomegranate Smoothie or the Fish McBites were originally successful products abroad and were adapted for the U.S. market.

McDonald's reported a rise in first-quarter profits last Friday. But the number fell short of market expectations, undermined by weaker international sales and U.S. consumers dining out less.

The fast food giant reported earnings excluding items of $1.26 per share, up from $1.23 a share in the year-earlier period.

Revenue increased to $6.6 billion from $6.55 billion a year ago. U.S. comparable sales fell by 1.2 percent, while falling by 1.1 percent in Europe. In both regions, McDonald's cited economic uncertainty.

Analysts had expected the company to report earnings excluding items of $1.27 a share on $6.59 billion in revenue, according to a consensus estimate from Thomson Reuters.

— Reuters contributed to this report.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

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