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McDonald's profit edges up despite slowdown in customer traffic

NEW YORK, N.Y. - McDonald's reported disappointing quarterly sales Thursday as fewer customers visited the world's biggest hamburger chain.

The Oak Brook, Ill.-based company says global sales slipped 0.1 per cent at established locations for the last three months of the year. In the U.S., where it recently revamped its Dollar Menu to include items that cost a little more, the figure fell 1.4 per cent.

After outperforming its rivals for years, McDonald's Corp. is facing a mix of challenges, including a shift in eating habits toward foods people feel are fresher or healthier. CEO Don Thompson has been working to better reflect those tastes by adding options such as chicken wraps and egg whites for its breakfast sandwiches.

But the efforts have yet to take hold. In a regulatory filing with the Securities and Exchange Commission, the company said it has seen a "muted response" to its various promotions.

For 2013, guest counts fell 1.9 per cent globally at established locations and 1.6 per cent in the U.S., according to the filing.

McDonald's is also facing heightened competition from old rivals such as Burger King and Wendy's, and all three chains have been aggressively promoting their value menus to fight for customers.

To address concerns that the focus on value could eat into profit margins, McDonald's in early November updated its decade-old Dollar Menu. The "Dollar Menu & More" now includes items that cost around $2 and $5.

During the quarter, McDonald's said customers on average spent more per visit. But global comparable sales were dragged down by the decline in guest counts.

In Europe, sales at locations open at least a year rose 1 per cent. It fell 2.4 per cent for the unit encompassing Asia, the Middle East and Africa.

The figure is a key metric because it strips out the volatility of newly opened and closed locations.

For January, McDonald's expects the figure to be flat and says the challenges it's facing will persist in the year ahead.

For the quarter, McDonald's Corp. earned $1.4 billion, or $1.40 per share, which is a penny more than Wall Street expected. A year ago, it earned $1.39 billion, or $1.38 per share.

The opening of new locations helped lift revenue to $7.09 billion. But it was still shy of the $7.1 billion analysts expected.

The company plans to open between 1,500 and 1,600 new restaurants in 2014, adding to its more than 34,000 locations worldwide.

Shares of McDonald's edged up 36 cents to $95.24.

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Follow Candice Choi at www.twitter.com/candicechoi

The Canadian Press


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