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UPDATE 2-McDonald's forecasts tough fourth-quarter, shares slide

Monday, 21 Oct 2013 | 10:50 AM ET

(Recasts; adds 4th-quarter forecast; analyst comment)

Oct 21 (Reuters) - McDonald's Corp dogged by lackluster economic growth and intense competition, warned on Monday that global sales at established restaurants would be relatively flat for October and signaled that weakness would continue in the fourth quarter.

McDonald's uninspiring performance has heaped pressure on Chief Executive Don Thompson, who has been at the helm for more than a year and has switched up top management and shaken up menus to boost sales and profits.

McDonald's has reported four straight quarters of disappointing sales, Hedgeye Risk Management restaurant analyst Howard Penney said on Twitter.

"When will the (company) transition from blaming the economy to internal issues?" said Penney, who told Reuters that McDonald's high-profile McCafe coffee and beverage expansion masked a slow-down in its core business selling hamburgers and french fries.

McDonald's shares initially fell 1.9 percent in early trading after investors digested the company's forecast for fourth-quarter restaurant margin declines that are similar to what the chain posted in the first quarter.

That forecast suggests more margin pressure than "the market was expecting," Morningstar analyst R.J. Hottovy told Reuters.

Global sales at restaurants open at least 13 months gained 0.9 percent for the third quarter, falling just short of the analysts' estimate on softer-than-expected results from all of its major markets.

A recent survey from Goldman Sachs suggested that McDonald's, which lately has lagged rivals in introducing popular new menu items, might be losing favor with diners.

The company is fighting to step up sales in the United States after smaller rivals such as Wendy's Co and Burger King Worldwide Inc introduced new menu items and limited-time offers.

McDonald's previously got a sales bump from new products including oatmeal, sandwich wraps and lattes, but its more complicated menu has slowed service at the drive-thru.

McDonald's said third-quarter net income rose 4.6 percent to $1.52 billion, or $1.52 per share, coming in a penny better than analysts' average estimate, according to Thomson Reuters I/B/E/S. Revenue was up 2.4 percent at $7.32 billion.

Restaurant margins at both franchised and company-operated stores slipped in the quarter.

McDonald's shares fell nearly 1 percent, or 90 cents, to $94.27 on the New York Stock Exchange.

(Reporting by Lisa Baertlein in Los Angeles and Aditi Shrivastava in Bangalore; Editing by Sriraj Kalluvila and Maureen Bavdek)

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