The Telegraph
Since 1st March, 1999
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McDonald’s tastes sour quarter

Chicago, Dec. 18 (Reuters): McDonald’s Corp said on Tuesday it will post its first-ever quarterly loss after cutting jobs and closing outlets, as sales at the world’s largest restaurant company deteriorated in the saturated US fast-food market.

Shares of the hamburger maker fell 8 per cent to close at $ 15.99 on the New York Stock Exchange, down $ 1.39.

The stock, which fell an additional 4 cents in after hours trade on Instinet, was the most actively traded issue on the NYSE, earlier touching $ 15.59 — its lowest level in nearly eight years.

The US fast-food market has become increasingly competitive as McDonald's, hamburger rivals Burger King Corp and Wendy's International Inc and Taco Bell parent Yum Brands Inc struggle to maintain market share as consumer tastes change and other fast-food options emerge, such as sandwich chain Panera Bread Co.

McDonald's, based in Oak Brook, Illinois, has been testing other concepts, including pizza and Mexican-food chains, while Wendy’s has relied on its Canadian doughnut chain to help drive growth. Yum has been pushing aggressively into overseas markets such as China.

So far in the fourth quarter, McDonald's sales at stores open at least 13 months are down 1.6 per cent before the effects of foreign exchange, the company said in an updated earnings outlook.

Same-store sales in the United States, McDonald's largest market, fell 1.3 per cent in October and November and 1.5 per cent through the first 11 months of the year, a sign that the company’s new discounting strategy is not meeting expectations, analysts said.

“It's clear that the discounting programme is not working,” said Bear Stearns analyst Joe Buckley, referring to the “Dollar Menu” McDonald’s recently launched to drive up sales.

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