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Weakening economy, rivals hurt McDonald’s

Mae Anderson New York

Tough competition in the US and the weakening economy abroad was a double whammy for McDonald’s in the third quarter, sending the burger chain’s net income down by nearly 4 percent.

A frozen strawberry lemonade and an iced carmel mocha is seen in this photo illustration at a McDonald's Corp. restaurant in San Francisco, California, U.S., on Wednesday, July 20, 2011. McDonald's Corp. may report its eighth straight quarter of profit growth, the longest streak in 13 years, as beverages such as frozen strawberry lemonade combat rising costs that are making hamburgers less profitable. Photographer: David Paul Morris/Bloomberg. Credit: Bloomberg

McDonald’s said on Friday it was adjusting some of its plans to deal with the pressures, including stepping up advertising for its dollar menu and bringing back the popular McRib sandwich nationally in December to drive traffic into US stores.

The world’s largest hamburger chain with 33 000 locations worldwide has thrived in boom and bust times by selling cheap food and updating its menu. But global economic pressures and intensifying competition are wearing at the chain, which does two-thirds of its business overseas.

“When economic crisis began in 2008, few people thought the environment would still be as uncertain and fragile as it is today,” said chief executive Don Thompson.

“It is clear however that this operating environment is the new normal. As such our near-term focus is on stabilising and growing traffic and market share,” he said.

Morningstar analyst RJ Hottovy said: “McDonald’s is facing a lot of pressure. “They’re seeing more competition from their quick-service restaurants and fast-casual peers in the US and facing austerity measures and macroeconomic pressures in Europe and Asia.”

McDonald’s said its net income fell to $1.46 billion (R12.6bn), or $1.43 a share. That compares with net income of $1.51bn last year.

Analysts expected net income of $1.47 a share, according to Fact Set.

McDonald’s is facing stiffer competition from newer chains like Panera Bread, which offers higher-end food in a fast-casual atmosphere. Long-time rivals such as Wendy’s and Burger King Worldwide are also reworking their menus, renovating restaurants and launching new ad campaigns to win back customers. – Sapa-AP

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