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Lower US sales caused McDonald’s earnings to fall 30%, while Coca-Cola’s fell 14%. McDonald’s US sales have been under pressure as consumers switch to other chains, notably the fast-growing Chipotle Mexican Grill. Sales also fell in Russia, Germany and especially in China, where McDonald’s was hurt by a scandal involving meat supplies.
Meanwhile, Coca Cola’s profit is down, its US sales being lowered 1% during the quarter. Consumers are increasingly turning to alternatives to sweet, fizzy drinks. The company’s profits also suffered because of currency fluctuations and strengthening of the dollar.
That’s among the reasons why the Atlanta-based company said it would hand back, or refranchise, about two-thirds of its North American bottling territories by the end of 2017, and a substantial portion of the remaining territories no later than 2020.
“This is placing strong pressure on the short-term performance of our business,” said Chief Executive Muhtar Kent on the company’s earnings conference call. “We recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment,” Kent, 61, said in the statement.
As it reduces costs, Coca-Cola also reset its expectations for sales growth, saying the economy would remain challenging through 2015. The company lowered the bottom end of its long-term net revenue growth target to as low as 4 percent from 5 percent. Coca-Cola retained its goal to grow per-share earnings by a high single-digit percentage after this year.
Sales fell to $11.98bn in the quarter from $12bn a year earlier. Analysts had estimated $12.1bn on average, according to data compiled by Bloomberg. Coca-Cola, the world’s largest beverage maker, is struggling with sluggish international growth and concern over obesity and artificial sweeteners.
The shares dropped as much as 6.6% to $40.45 in New York on Tuesday, marking the biggest intraday decline since October 2008. Earlier this month, the stock was trading in record territory. It had risen 4.8% this year up to on Tuesday, compared with a 3% gain for the Standard & Poor’s 500 index.
Sales volume declined 1% in North America last quarter, while global volume climbed 1%.
PepsiCo Inc., Coca-Cola’s biggest rival, is tightening its belt as well. CEO Indra Nooyi is cutting $5 billion over the next five years, helping bolster profit. The second-largest beverage company raised its earnings forecast for the year when it delivered quarterly results earlier this month.