McDonald’s Profit Dips but Stock Rises

McDonald’s Corp. on Tuesday posted lower earnings for the seventh time in eight quarters, but its stock rose on plans to cut new restaurant openings and increase spending on existing outlets.

With the help of a 1-cent dividend increase, McDonald’s stock moved up as much as 9% in its biggest one-day gain on the New York Stock Exchange in at least two years.

McDonald’s said that next year it would open about 600 hamburger restaurants worldwide, down from a high of about 2,000 in 1996. It plans to open 1,300 restaurants this year.

As part of a worldwide review of its costs, McDonald’s Chief Executive Jack Greenberg also told analysts in a conference call that job cuts are likely, but he would not say when or how many jobs would be cut.

Many analysts said that McDonald’s, which has long relied on opening new units to drive sales, should fix problems in its existing U.S. restaurants instead of opening new ones.

“Management has ‘gotten religion’ and will dramatically reduce new restaurant openings,” Bank of America analyst Andy Barish wrote in a note. He called the decision a “positive.”

While cutting back on its traditional restaurants, the Oak Brook, Ill.-based company also said it would expand its non-hamburger chains, including Chipotle, Pret A Manger, Donato’s Pizza and Boston Market.

McDonald’s reported third-quarter net income of $486.7 million, or 38 cents a share, compared with $545.5 million, or 42 cents a share, a year earlier.

Systemwide sales, made up of both company-owned and franchised restaurants, rose 3%, to $10.91 billion. Revenue, comprising sales in company-owned restaurants and fees from franchisees, rose 4%, to $4.05 billion.

On a global basis, comparable sales fell 3%. In the U.S., McDonald’s biggest market, comparable-store sales fell 2.8%, and they fell 1.3% in Europe.

McDonald’s stock was among the most actively traded issues on the NYSE on Tuesday, rising 65 cents to close at $18.95 after peaking at $19.95 earlier in the session. The stock is down about 28% this year, compared with a nearly 14% drop in the S&P; restaurant index.