McDonald’s to Post Its First Quarterly Loss

McDonald’s Corp. said Tuesday that it will post its first quarterly loss after cutting jobs and closing outlets, as sales at the world’s largest restaurant deteriorated in the saturated U.S. fast-food market.

Shares of the hamburger maker fell $1.39, or 8%, to $15.99 on the New York Stock Exchange. The stock was the most actively traded issue on the NYSE, earlier touching $15.59, its lowest level in nearly eight years.

The U.S. 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, Ill., 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% 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% in October and November and 1.5% 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 program is not working,” said Bear Stearns analyst Joe Buckley, referring to the “Dollar Menu” McDonald’s recently launched to drive up sales. “To improve service is very important for them, I think that’s kind of the short-term key.”

McDonald’s, whose chief executive, Jack Greenberg, is retiring at the end of the year, also indicated that quarterly sales are worsening, with sales in December showing poorer trends than October and November. The company has reported lower earnings in seven of the last eight quarters.

Incoming CEO Jim Cantalupo, former vice chairman and president, is in the process of “aggressively reviewing” all aspects of the restaurant company’s operations with an eye on improving financial performance.

The review could result in fourth-quarter charges beyond the $390 million now earmarked for worldwide restructuring, McDonald’s said.

In November, McDonald’s said it would close about 175 restaurants, slash up to 600 corporate jobs and pull out of three countries in the Middle East and Latin America.

The actions signal a pullback for a company with some 30,000 worldwide restaurants that has been criticized for sacrificing profits in favor of aggressive expansion.

Including charges, McDonald’s said it expects to post a fourth-quarter loss of 5 cents to 6 cents a share, its first loss in its 47-year history.

Before items, the company said it will earn 25 cents or 26 cents a share, short of analysts’ expectations. Last year the company earned 21 cents a share, or 34 cents before items.