McDonald's second-quarter earnings beat Wall Street estimates, but U.S. sales cooled more than expected and revenue tumbled 12 percent.
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 U.S. restaurants.
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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 and Prevention said last week it has traced at least 163 cases across 10 states back to McDonald's. The company said all of the locations have been resupplied from a different vendor.
McDonald's reported Thursday that 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 by 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 down 2.5 percent Thursday.
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 by 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 expected by analysts surveyed by Thomson Reuters.
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," CEO Steve Easterbrook said in a statement.
Same-store sales, a key metric for restaurant companies, were up 4 percent globally, higher than the 3.5 percent expected by StreetAccount.
While same-store sales have been positive for the last 12 quarters, it's guest count, which had been positive for five straight quarters, saw a 0.3 percent drop.
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.
McDonald's said it had expanded delivery to 13,000 locations in 60 markets. At these locations, delivery accounts for 10 percent of sales.
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 10 percent this year.
