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McDonald's Profits Lower Again

(AP) - Concerns about beef safety in Europe sent McDonald's Corp.'s [NYSE:MCD - news] profits lower for a third straight quarter.

But the hamburger chain on Tuesday said recent sales improvements in slumping European markets may signal the worst of the mad cow and foot-and-mouth disease scare is over, pushing its stock higher on Wall Street.

Net earnings for the second quarter were $440.9 million, or 34 cents a share, down 16 percent from $525.9 million, or 39 cents a share, in the same period a year ago. That met the expectations of Wall Street analysts polled by Thomson Financial/First Call, which were lowered last month after McDonald's warned of the latest earnings shortfall.

In early trading on the New York Stock Exchange, McDonald's shares rose 61 cents to $28.38, a 2.2 percent gain.

Sales were $10.239 billion, up fractionally from $10.238 billion a year ago but only as a result of new restaurants and the recent acquisition of Boston Market. Sales declined 2 percent in Europe -- its biggest international market -- 0.8 percent in the United States and 4 percent in the Asia/Pacific region.

As a result of what chairman and chief executive Jack Greenberg called ``a tough six months,'' including weak currencies abroad, the Oak Brook, Ill.-based company said it is considering closing as many as 250 underperforming restaurants located primarily in emerging markets.

``While these results are below trend line, we are encouraged by improved performance in Europe, where we saw sequential improvement in comparable sales throughout the quarter,'' Greenberg said. He cited in particular an increase the last four months in France, where the beef woes first surfaced last October, along with strong results in Britain, the Netherlands and Russia.

The company said it expects the impact from European consumers' beef concerns to continue to lessen.

More than 100 people have died in Britain and other European countries from the recent outbreak of Creutzfeldt-Jakob disease -- the human form of mad cow disease, or bovine spongiform encephalopathy. Scientists believe people get the fatal illness by eating infected beef; no safety problems with McDonald's beef has been found.

Ann Gurkin, an analyst for Davenport and Co., said the results contained no significant surprises. She said McDonald's repurchase of $738 million of its stock in 2001 has kept its bottom line from being worse.

``We look for the company to benefit in the second half from sequential improvement and positive comparisons to last year,'' she said. ``Hopefully the mad cow disease scare should continue to wane.''

For the first six months of 2001, net income was $819.2 million, or 62 cents a share, down 16 percent from $976.8 million, or 71 cents a share. Sales were $19.89 billion, up 1 percent from $19.74 billion.

McDonald's operated 29,250 restaurants worldwide as of June 30. It also operates Aroma Cafe, Boston Market, Chipotle Mexican Grill and Donatos Pizza restaurants.
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