Restaurant executives cautious on consumer, economy

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Chipotle Mexican Grill

Same-store sales growth slowed sequentially from April to June for Chipotle, yet the company still managed an 8-percent same-store sales increase for the quarter. Many on Wall Street thought that was a sales miss, as the fast-casual burrito chain typical record double-digit same-store sales results.

 Total revenue rose 21 percent and Chipotle’s net income rose 61 percent to $81.7 million. Officials said they expect mid-single-digit same-store sales growth for the rest of 2012. The company’s stock fell more than 20 percent in morning trading on July 20, when it released its earnings results.

In a call with analysts, Jack Hartung, Chipotle's chief financial officer, said:

“We're seeing a slowdown. I mean — there's no other way around it. We were humming along nicely in the first quarter. We were humming along nicely in April. And then we saw a slowdown. … We think it's related to just general consumer spending. We're not seeing anything that's specific to markets. It seems like it's pretty broad based. It's not a significant slowdown, but it is a slowdown….

"I can tell you that the one thing that's interesting, [although] it doesn't explain the slowdown. A significant percentage of our increase is takeout. And so we do have more people coming in and leaving. And I don't know what that means. It does mean that we are selling a few less drinks….

"I'll tell you what we're not going to do: We're not going to do things that traditional QSR might do. So we're not going to do discounting or rush out and come up with the next new menu item.”

McDonald’s

Slowing economies in Europe, Japan and China were a drag on McDonald’s earnings, which foreign-currency translation battered to a 4-percent decrease to $1.35 billion for the quarter. Same-store sales rose 3.6 percent in the United States, 3.8 percent in Europe and 0.9 percent in the Asia-Pacific, Middle East and Africa division.

Across the world, McDonald’s plans to intensify its marketing spending and value proposition to coax consumers into incremental visits, officials said. McDonald’s also saw its stock slide following its earnings report.

In a call with analysts, Don Thompson, chief executive of McDonald's, said:

“At points [previously], we’ve seen one or two markets of our top 10 — maybe three or four — that might be experiencing these consumer confidence issues. This is one of the first times when we’ve seen more of a global piece, so it’s a little bit more than a European cold. What it all means for us is that the

things that we’ve employed historically — we’ve got to make sure that we’re in the best position again to drive additional traffic in the restaurant and be able to trade those customers up….

"We’re seeing a hike in competitive activity across the informal-eating-out marketplace, which is interesting because it’s not just in QSR. We’re seeing it across all of the marketplace from fast casual to convenience stores a

nd grocery stores. Having said that, for us at McDonald’s, what matters most is to remain focused on what’s within our realm of control.”

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