McDonald's Corporation alarmed the American investment community with a profits warning, saying it now expected full-year earnings per share to be up to 7% lower than its previous estimates because of weakness in its main American and European markets.
The burger giant said it would now open fewer outlets than this year's original target of 1,300 to 1,400 new stores, without saying how many fewer.
Although McDonald's still expects its final figures to be better than last year, it said it sees third quarter figures for 2002 being up to 9.5% worse than 2001, at an eps of 38 or 39 cents, against 42 cents for the same period 12 months ago.
It said it now expects 2002 earnings per share to be $1.43 or better, excluding charges in the first quarter, up from $1.25 in 2001, but down on its estimate three months ago of $1.47 to $1.52.
The group said system-wide sales for the first two months of the third quarter of 2002 were $7.5bn, up 3% compared with the same period in 2001.
Jack Greenberg, McDonald's chairman and chief executive officer, said: “The US marketplace continues to be extremely competitive and customers have many choices.
“In Europe, sales were weaker than expected, particularly in Germany where the economy continues to contract and in the UK, where retail sales have slowed. In addition, our marketing messages in these countries did not resonate as well with consumers as we had hoped.
"Therefore, we are making adjustments and are optimistic that sales in these countries will improve in the fourth quarter as our aggressive marketing plans feature new tastes and value."
In constant currencies, European sales increased 4% for the first two months of the third quarter and 7% January-to-August compared with the same periods last year.
McDonald's said European sales growth was expected to be in the mid-single digits for the year and American sales growth was due to be in low-single digits.
Analysts queried the effectiveness of McDonald's new sales strategies, such as a $1 menu in the United States. John Ivankoe, a senior analyst at JP Morgan, said McDonald's had underperformed its rivals for two years and was struggling to keep up with consumer demands for more than just low-cost meals. He said: "It is the necessity of any brand to evolve to the customer's needs. McDonald's is behind the curve."
The burger giant said it would now open fewer outlets than this year's original target of 1,300 to 1,400 new stores, without saying how many fewer.
Although McDonald's still expects its final figures to be better than last year, it said it sees third quarter figures for 2002 being up to 9.5% worse than 2001, at an eps of 38 or 39 cents, against 42 cents for the same period 12 months ago.
It said it now expects 2002 earnings per share to be $1.43 or better, excluding charges in the first quarter, up from $1.25 in 2001, but down on its estimate three months ago of $1.47 to $1.52.
The group said system-wide sales for the first two months of the third quarter of 2002 were $7.5bn, up 3% compared with the same period in 2001.
Jack Greenberg, McDonald's chairman and chief executive officer, said: “The US marketplace continues to be extremely competitive and customers have many choices.
“In Europe, sales were weaker than expected, particularly in Germany where the economy continues to contract and in the UK, where retail sales have slowed. In addition, our marketing messages in these countries did not resonate as well with consumers as we had hoped.
"Therefore, we are making adjustments and are optimistic that sales in these countries will improve in the fourth quarter as our aggressive marketing plans feature new tastes and value."
In constant currencies, European sales increased 4% for the first two months of the third quarter and 7% January-to-August compared with the same periods last year.
McDonald's said European sales growth was expected to be in the mid-single digits for the year and American sales growth was due to be in low-single digits.
Analysts queried the effectiveness of McDonald's new sales strategies, such as a $1 menu in the United States. John Ivankoe, a senior analyst at JP Morgan, said McDonald's had underperformed its rivals for two years and was struggling to keep up with consumer demands for more than just low-cost meals. He said: "It is the necessity of any brand to evolve to the customer's needs. McDonald's is behind the curve."
