McDonald's feeling the effects of downturn

New York - Not even McDonald's Corp. has an iron stomach when it comes to the global economic downturn.

The world's largest hamburger chain has thrived in boom and bust times by selling cheap eats and constantly updating its menu with popular items such as fruit smoothies and snack wraps. But the company is starting to show signs of wear from global economic pressures, intensifying competition and penny-pinching customers who are eating out less often in some hard-hit regions around the world.

The Oak Brook, Ill.-based company said Monday that its net income fell 4 percent in the second quarter as a strong dollar took a hit on results. Like other U.S. companies, McDonald's is being squeezed by unfavorable currency exchange rates. When the dollar is rising against the other world currencies, companies that do business internationally take a hit when converting local currencies back into the dollar.

McDonald's is also facing higher costs for labor and ingredients, although it said it now expects commodity costs to rise between 3.5 percent and 4.5 percent for the full year, down from the previous forecast of up to 5.5 percent.

Suggesting more challenges ahead, McDonald's said global sales at restaurants open at least a year rose 3.7 percent for the three months ended June 30. The figure, which is a key metric because it strips out the impact of newly opened and closed locations, represents the slowest growth since the company reported sales growth of 2.3 percent in the fourth-quarter of 2009.

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