McDonald’s on Monday reported a second-quarter profit that rose 4 percent but fell short of Wall Street expectations. It also said July sales are expected to be relatively flat and warned of a tough year ahead, given the heightened competition and rough economic conditions around the world.
"We don't have as much pricing power," said CEO Don Thompson, noting that the company wouldn't be able to easily charge more for its food without the risk of scaring off customers.
But McDonald’s isn’t taking its dreary outlook sitting down. Indeed, the world’s largest fast food chain plans to address its issues by taking some big steps [as outlined by Business Insider’s Ashley Lutz]:
Expand breakfast. McDonald's breakfast menu is unanimously popular with consumers. To capitalize on the existing market, McDonald's added an Egg White Delight to its breakfast menu. It also started offering some items, like Egg McMuffins and hash browns, at night. CEO Don Thompson said the chain is toying with the idea of an all-day breakfast.
Offer premium menu items. In addition to the Egg White Delight (which is made with white cheddar), McDonald's also rolled out the McWrap and Blueberry Pomegranate smoothie.
Redesign the arches. About half of McDonald's restaurants will get renovations to reflect the "current contemporary look," — muted colors and modern exteriors instead of red and yellow decor — the company said yesterday. McDonald's hopes this will help for it to compete with fast casual chains like Panera Bread, which have eaten up market share in recent years.
Another challenge for McDonald's is the growing number of chains that offer quick, better quality food at higher prices, including Chipotle, Noodles & Company, Panera Bread and others. Those chains are reshaping expectations when people go out to eat.
Traditional fast-food chains have taken note and are scrambling to keep pace.
Wendy's, for example, is in the process of renovating its restaurants to be more inviting and modern. Its new burgers are positioned as premium, and the chain has been making tweaks such as introducing natural-cut French fries and softening the edges of its famously square burgers so they don't look so processed.
McDonald's shares fell 2.7 percent, or $2.69, to close at $97.58. Over the past year, the stock is up 13 percent.
For the quarter, the company earned $1.4 billion, or $1.38 per share. That's up from $1.35 billion, or $1.32 per share, a year ago.
Earnings were short of the $1.40 analysts expected. Revenue rose to $7.08 billion, in line with expectations, according to FactSet
The company, which has more than 34,000 locations worldwide, says global sales edged up 1 percent at restaurants open at least a year. The figure rose by the same amount in the U.S.
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The Associated Press contributed to this report.