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Weak dollar, strong competition make impact on McDonald's profit

McDonald’s says that while its sales have held up, its overall operating income is beginning to take a hit.

Image: Amy Sancetta/AP

MCDONALDS HAS REPORTED lower-than-expected profits for the third quarter of 2012, blaming the strength of the dollar and increasing competition for the drop in its income.

Though the worldwide fast food chain reported overall profit of $1.46 billion (€1.12 billion) for the three months between July and September, this was down by 3.3 per cent from the $1.51 billion (€1.16 billion) reported in the same period last year.

The fall in net income came despite sales being almost unchanged, with $7.15 billion (€5.5 billion) of sales worldwide compared to $7.17 billion in 2011.

Europe offered an example of the company’s current woes: sales were up by 1.8 per cent, but operating income fell by 7 per cent when compared to the equivalent period from last year.

If the exchange rate between the dollar and euro had remained unchanged, however, the increase in sales would have meant overall operating income was up – by some 3 per cent.

AP quoted the company chief executive Don Thompson as telling investors: “When economic crisis began in 2008, few people thought the environment would still be as uncertain and fragile as it is today.

“It is clear however that this operating environment is the new normal. As such our near-term focus is on stabilizing and growing traffic and market share.”

He added that under a measurement the fast food chain considers important – revenue gained in stores which had been open for 13 months or more – revenue was down.

Shares in the chain traded on the New York Stock Exchange closed down 4.5 per cent, at $88.72 (€68.13) each – making the company worth just under $90 billion.

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About the author:

Gavan Reilly

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