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Sales Slowdown Fries McDonald's

Fourth-quarter profits are strong, but flat December U.S. comps send shares sliding.
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McDonald's (MCD) - Get McDonald's Corporation Report posted a solid rise in fourth-quarter profits, topping analysts' expectations for the period, but a significant sales slowdown for December sent shares of the fast-food giant sliding Monday.

For the fourth quarter, McDonald's reported net income of $1.27 billion, or $1.06 a share. A year earlier, the company earned$1.24 billion, or $1 a share, including a 40-cent-a-share one-time gain.

The latest quarter included 33 cents a share in one-time items, mainly tied to tax benefits. Excluding these gains, earnings were 73 cents a share, beating analysts' mean estimate by 2 cents.

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McDonald's revenue climbed to $5.75 billion from $5.45 billion the prior year, exceeding Wall Street's $5.61 billion target. Same-store sales, or sales at stores open at least 13 months, climbed 3.3%.

The company, said, however, that December U.S. same-store sales were flat, creating worries that a recent multiyear resurgence for the Golden Arches may be slowing down. McDonald's attributed the flat results to severe winter weather throughout the month and softer consumer spending.

McDonald's has seen its U.S. sales climb in recent years as it bulked up its offerings to include new breakfast items, more gourmet coffee and a $1 menu. It has seen even stronger results abroad, with strong demand, as well as currency gains, yielding double-digit revenue growth. Shares of the company climbed more than 40% in 2007 amid these gains.

The sales slowdown in the U.S. comes as many retailers have reported weakness in December, with the housing slump and rising fuel prices forcing consumer to tighten their purse strings. McDonald's, for its part, said it remains confident in its U.S. business and is "optimistic" about the outlook for 2008.

Shares of McDonald's recently were down $3.02, or 5.6%, to $51.08.

This article was written by a staff member of