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10/04/03 . Deborah Cohen . Reuters . USA
McDonald's Same-Store Sales Down for 13th Month
By Deborah Cohen
CHICAGO (Reuters) - McDonald's Corp. said on Thursday same-store sales fell in March for the 13th straight month, dragged down by its European and Asian markets, as the global economy suffers from the war with Iraq (news - web sites) and a mysterious Asian illness.
"I would think that the protests and just the negative publicity surrounding protests at some of their stores in Europe might have kept customers away," said David Kolpak, an analyst with Victory Capital Management, which held 2.55 million shares through December.
Since the war, McDonald's and other global icons such as coffee chain Starbucks Corp. (Nasdaq:SBUX - news) have come under increased scrutiny, seen by many in Europe, the Middle East and elsewhere as physical representations of the United States. There have been attacks on McDonald's restaurants.
In March, consumers also faced fears over the deadly virus known as SARS, or severe acute respiratory syndrome, an illness that has hampered travel to parts of Asia, where it is believed to have started.
Representatives for the world's largest restaurant operator declined to comment further on specific markets.
Sales at McDonald's restaurants open at least 13 months fell 3.7 percent in March.
In Europe, McDonald's second-largest market behind the United States, sales fell 5.4 percent, McDonald's said. Same-store sales are provided in constant currencies.
Same-store sales in McDonald's Asia/Pacific, Middle East and Africa market dropped 9.9 percent, also pressured by a Japanese economy that has remained weak.
In the United States, same-store sales eased 1.2 percent after a 4.4 percent decline in February, a showing analysts said was better-than-expected. U.S. restaurant sales have suffered from harsh winter weather and consumers' tendency to stay home and watch the war with Iraq on television.
Amy Kaser, an analyst with Loomis Sayles & Co, attributed part of McDonald's monthly same-store sales decline to higher global oil prices that have crimped consumers' budgets.
"I expect April trends could be slightly better," said Kaser, whose firm held 1.31 million McDonald's shares through December.
Shares of McDonald's, which touched 10-year lows in March, traded 2 cents higher at $15.52 on the New York Stock Exchange (news - web sites) early Thursday afternoon.
The company said total systemwide sales at its 30,000 worldwide hamburger outlets rose 5 percent in the month to nearly $3.7 billion, but fell 1 percent in constant currencies.
Chief Executive Jim Cantalupo alluded to the war's impact on global sales, but did not provide specifics.
"In March, systemwide customer traffic was somewhat less than originally expected as consumers altered their daily routines in response to world events," he said in a statement.
In the United States, where McDonald's operates some 13,000 hamburger restaurants, it is fighting to hold market share as new entrants to the fast-food market like sandwich maker Panera Bread Co. (Nasdaq:PNRA - news) try to lure customers away.
"U.S. sales for March showed progress against the competition, although results continued to be affected by the sluggish U.S. economy," said Cantalupo, who backed his promise to turn the company's global business around in 12 to 18 months.
On Monday, he unveiled a strategy to improve food and basic operations at McDonald's, whose earnings have disappointed investors for more than two years. Wall Street expects more details on sales trends on April 28, when the company reports first-quarter results.
The difficult U.S. economy has also hurt rivals such as No. 3 hamburger chain Wendy's International Inc. (NYSE:WEN - news), which posted a 3 percent same-store sales decline in March at its company-operated hamburger stores. Wendy's has avoided an aggressive price war triggered by McDonald's and Burger King late last year.
Quarterly same-store sales at McDonald's restaurants fell 3.6 percent, while total systemwide sales rose 5 percent to nearly $10.2 billion, and were unchanged in constant currencies.