Currency Crushes McDonald's Q2 Results

A weak euro relative to the dollar whipped McDonald's MCD second-quarter results like a McCafe Frappe, pinching margins and turning roughly in-line revenue results into an earnings miss. The world's largest fast-food chain earned $1.35 billion in the second quarter, down two percent from $1.41 billion or $1.35 a share in the same quarter last year. Analysts had been expecting earnings of $1.37 billion. Operating margins were 31.2 percent, down from 31.7 percent a year earlier. “While the environment has become more challenging, we continue to see significant opportunities to further differentiate and grow the McDonald's brand,” said CEO Don Thompson in a statement. “We have the resources and discipline to invest for the long-term benefit of our system and our shareholders." Overall results reflected a slowing economy, “persistent” economic headwinds, and were aided by investments geared toward increasing restaurant efficiency. Global revenue was $6.92 billion, up 0.2 percent, roughly in line with analyst expectations of $6.94 billion. Yet without currency effects, revenue growth would have been five percent, and global same-store sales rose 3.7 percent. Even in Europe, sales were OK: Same-store sales growth was 3.8 percent in the region, led by strong results in the U.K. And Russia. It was the currency effects that took their toll. The company's operating income would have increased 8% in Europe, in constant currencies. Yet the currency translation led to an operating income decline of three percent in the region.