Disappointing Earnings Add to McDonald's Bad Week

Legal battles with franchisees, expired meat and another disappointing quarterly report: it's already been a hard week for McDonald's.

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By Kate Taylor

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It's only Tuesday, and McDonald's week is already looking pretty grim.

McDonald's reported "relatively flat" same-store sales worldwide in its second quarter, with U.S. same-store sales falling 1.5 percent. The burger chain said it doesn't expect to see much improvement for the rest of the year, forecasting a decline in global sales in July.

"Heading into 2014, we acknowledged that we did not expect any material changes to the operating environment this year," said CEO Don Thompson in a statement. "As such, full year 2014 global comparable sales are expected to be relatively similar to year-to-date June performance, with July global comparable sales expected to be negative."

The company cited low customer traffic and "ongoing broad-based challenges" as reasons for the decline.

Related: Franchisees in Puerto Rico Claim McDonald's Broke FTC Rule

The company reported a profit of $1.39 billion, or $1.40 a share, missing analysts' estimates of $1.44 a share. Revenue also fell short of expectations, coming in at $7.18 billion, shy of the $7.29 billion expected.

China proved to be a rare, strong market in the second quarter, with the region's strong performance helping same-store sales in Asia/Pacific, Middle East and Africa to increase 1.1 percent. However, McDonald's may not be able to rely on the Chinese market to boost profits next quarter – recent reports revealed that McDonald's supplier in the country had been selling McDonald's and other fast-food chains expired meat.

McDonald's has also faced internal struggles in recent weeks. Franchisees in Puerto Rico are taking the franchisor to court for allegedly breaking its franchise agreement while former New York City McDonald's employees filed charges for terminating employees due to their union involvement.

To make matters worse for the burger chain, McDonald's competitors are thriving while the fast-food chain's slump continues. Last week, Yum Brands reported a solid second quarter, with worldwide same-store sales growing 6 percent. And, on Monday, Chipotle reported its same-store sales increased a whopping 17 percent from the same period last year.

Related: New McDonald's Lawsuit Could Redefine Franchising as We Know It

Kate Taylor

Reporter

Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

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