McDonald's to Unveil Turnaround Plan as Sales Fall Again

McDonald's Same-Store Sales Top Estimates as Declines Abate
Luke Sharrett/Bloomberg via Getty Images

By Shailaja Sharma and Lisa Baertlein

McDonald's is developing a new turnaround plan to improve sales and profits as the company struggles to regain its footing in the highly competitive fast-food market.

Shares of the world's biggest restaurant chain by sales rose 3.8 percent to $98.38 in early trading Wednesday.

%VIRTUAL-pullquote-"Folks hoping for a near-term rise in the stock may be hanging their hat on hopes that McDonald's can spark some pizzazz in investors that day.%In its first quarterly results under new Chief Executive Officer Steve Easterbrook, McDonald's global comparable sales at restaurants open at least 13 months fell 2.3 percent in the first quarter ended March 31.

Easterbrook will share initial details of the turnaround plan on May 4, the company said in a statement.

"Folks hoping for a near-term rise in the stock may be hanging their hat on hopes that McDonald's can spark some pizzazz in investors that day," Janney Montgomery Scott analyst Mark Kalinowski wrote in a note.

McDonald's is fighting to recover from food scandals in China and Japan and is facing tough competition at home in the United States from more nimble chains ranging from Chipotle Mexican Grill (CMG) to Burger King (BKW).

McDonald's Japanese unit this month forecast deeper losses this year following a series of food safety scandals that have drawn customers away.

Easterbrook has already said McDonald's USA will switch to chicken raised with fewer antibiotics, putting it more in step with Chipotle and Chick-fil-A.

In the United States, McDonald's promotions failed to attract customers in the latest quarter. U.S. comparable sales fell 2.6 percent.

Analysts on average had estimated a 1.8 percent fall in the company's global same-store sales and a 2.1 percent fall in the United States, according to analysts polled by research firm Consensus Metrix.

April global comparable sales are expected to be negative, McDonald's said.

Net income fell 32.6 percent to $811.5 million, or 84 cents a share. Excluding items, McDonald's earned $1.01 a share.

Analysts on average had expected a profit of $1.06 a share, according to Thomson Reuters I/B/E/S.

Revenue fell 11 percent to $5.96 billion, but were largely in line with analysts' average expectation.