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Big Mac to open fewer new outlets

New York, Oct. 23 (Reuters): McDonald’s Corp. on Tuesday posted lower earnings for the seventh time in eight quarters, but its stock rose on plans to cut new restaurant openings and increase spending on existing outlets.

With the help of a 1-cent dividend increase, McDonald’s stock moved up as much as 9 per cent in its biggest one-day gain on the New York Stock Exchange in at least two years.

Next year, McDonald’s said it would open about 600 hamburger restaurants worldwide, down from a high of about 2,000 in 1996. The company plans to open 1,300 restaurants this year.

As part of a worldwide review of its costs, McDonald’s chief executive officer Jack Greenberg also told analysts in a conference call that job cuts are likely, but would not say when or how many jobs would be cut. Nearly one year ago, McDonald’s cut about 700 field and home office jobs in the United States to cut costs.

Many analysts said that McDonald’s, which has long relied on opening new units to drive sales, should fix problems in its existing US restaurants instead of opening new ones.

“Management has ‘gotten religion’ and will dramatically reduce new restaurant openings,” wrote Bank of America analyst Andy Barish in a note. He called the decision a “positive”.

“We believe this will eventually lead to a better chance of consistently positive same-store sales and at least maintaining margins in the United States and Europe,” Barish said. He also upgraded his rating on McDonald’s shares to “buy” from “market performer” on Tuesday.

While cutting back on its traditional restaurants, the Oak Brook, Illinois-based company also said it would expand its non-hamburger chains such as Chipotle, Pret A Manger, Donato’s Pizza, and Boston Market.

McDonald’s said it would add about 90 non-hamburger outlets this year, and between 150 to 175 next year. It also said it would double the number of Chipotle restaurants, citing the Mexican food chain’s strong results. The company operated 1,077 non-hamburger restaurants at the end of the quarter.

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