Beef Fears Prompt McDonald’s to Lower Outlook

McDonald’s Corp. said Wednesday that its first-quarter earnings will decline more than forecast because European consumers afraid of “mad-cow” disease are shunning its hamburgers.

The fast-food giant, which gets more than a third of its sales from Europe, said profit probably will fall to 29 cents to 30 cents a share from 33 cents a year ago. Analysts were expecting 32 cents, according to First Call/Thomson Financial. Sales in January and February were unchanged from a year earlier at $6.2 billion, the company said.

“The effect of consumer concerns regarding the European beef supply has persisted longer than we expected,” Chief Executive Jack Greenberg said.

The beef flap already sent the company’s fourth-quarter earnings lower for the first time since 1998.

Europeans are buying fewer McDonald’s hamburgers because of concern over the brain-wasting disease found in cattle. The disease has led to the deaths of more than 90 people.

McDonald’s also was hurt by declines in the value of the euro, the British pound and the Japanese yen, compared with the dollar.

The company also may be hampered by the spread of foot-and-mouth disease in Britain, said Chief Financial Officer Michael Conley. He didn’t say how much sales may be hurt. Foot-and-mouth disease is believed to be harmless to humans.

Shares of Oak Brook, Ill.-based McDonald’s, a member of the Dow Jones industrial average, fell to a three-year low of $26.29 before recovering somewhat to close at $27.55, off 25 cents.

The company said annual profit will be 4 cents to 5 cents lower than its previous estimate, assuming the value of worldwide currencies remains the same. It had forecast profit of $1.60 to $1.65 a share. Analysts’ average estimate was $1.60, according to First Call.

Greenberg said the company is taking immediate steps to improve its financial performance, including trimming the number of restaurants it plans to open worldwide in 2001 by about 100 from the previous target of 1,600. The company will consider opening more outlets in the U.S. and cutting those in emerging markets with troubled economies.

To boost sales in Europe, McDonald’s has been promoting more chicken and pork products in mad-cow-affected countries.

The company also plans to introduce the “Made for You” cooking system in Europe that it has implemented in U.S. restaurants, Bloomberg News reported. The cooking system makes food to order and helps McDonald’s roll out new products.

Cases of mad cow were discovered in late 2000 in countries such as France and Germany.

In January, the disease was found in a cow slaughtered by a McDonald’s supplier in Italy.