McDonald's said on Tuesday U.S. sales at established restaurants fell in March, the first monthly decline in five years, overshadowing higher-than-expected first-quarter profit and strong overseas sales.
Concern over slowing U.S. sales trends sent McDonald's shares lower in early trade. In the past, the hamburger chain, and certain rivals in the fast-food sector, have benefited by selling lower-priced offerings to cash-strapped consumers trying to save money.
McDonald's said sales at its U.S. restaurants open at least 13 months rose 2.9 percent in the first quarter but fell 0.8 percent in March. Overall same-store sales rose 3.3 percent in the 2007 fourth quarter.
Near-term trading will focus on the weak March same-store sales, Goldman Sachs analyst Steven Kron warned in a client note. The March decline "certainly speaks to a challenging industry sales environment and a modest deceleration at (McDonald's)," he wrote.
The world's largest restaurant chain operator posted net income of $946.1 million, or 81 cents per share, for the first quarter, up from $762.4 million, or 62 cents per share, a year earlier.
Analysts, on average, had forecast 70 cents per share, according to Reuters Estimates.
Revenue rose 6 percent to $5.61 billion. Analysts had been looking for $5.55 billion.
Same-store sales rose 7.4 percent, fueled by international results that outpaced analysts' expectations.
Same-store sales rose 11.1 percent in Europe and 9.4 percent in the Asia/Pacific, Middle East and Africa segment. Higher profit margins also helped boost the first-quarter results.
McDonald's and rival Burger King Holdings have been outperforming the overall U.S. restaurant sector, which has been hobbled by high gasoline and food prices and the slumping housing market.
Despite the March sales figures and concern that the weakening U.S. economy is starting to hurt McDonald's, the stock is still a good investment relative to others in the restaurant sector, said Dave Kolpak, analyst at Victory Capital Management.
"There's no question that it is affecting its business, but we as investors look at McDonald's relative to other investment opportunities and we see McDonald's gaining market share at an impressive pace, with people trading down from casual dining."
Victory owns 1.6 million McDonald's shares and has assets of $62 billion under management.
For April, McDonald's forecast a 2 percent to 2.5 percent increase in U.S. same-store sales. It forecast a 5.5 percent to 6.5 percent increase in European same-store sales, and a 6.5 percent to 7.5 percent increase in the Asia/Pacific, Middle East and Africa region.
McDonald's shares were down 30 cents to at $58.37 in morning trade on the New York Stock Exchange after falling as low as $57.43 earlier in the session. Through Monday, the shares had risen 21 percent over the past year.