McDonald's Corp (MCD.N) posted its worst quarterly restaurant sales growth performance in nine years, signalling broad pressure on an industry where resurgent chains like Burger King and Taco Bell are fighting aggressively for diners who are spending less to eat out.
The world's biggest fast-food chain also reported on Friday its second quarter in a row of earnings that missed Wall Street's estimates. McDonald's said sales at established restaurants, a closely watched gauge of restaurant performance, are down so far this month.
The results - which underscored how the sluggish U.S. economic recovery, European belt-tightening and cooling growth in China are squeezing even the best-performing restaurant operators - drove McDonald's stock down 3.8 percent to $89.34 in early afternoon trading on Friday and were a drag on other restaurant stocks.
"It's been very rare that we've ever seen all of our major markets experiencing the impact of these kind of global economies at the same time," McDonald's Chief Executive Officer Don Thompson said in a conference call with analysts.
The report from McDonald's landed a day after Chipotle Mexican Grill Inc (CMG.N) forecast decelerating same-restaurant sales for 2013, signalling its days of torrid growth may be over.
Government and restaurant data showed restaurant trends decelerated in September, Bernstein Research analyst Sara Senatore said.
"I think the conclusion is that demand is slow in the United States," Senatore said. "You have a scenario where the overall pie is shrinking, and companies are competing aggressively to take their piece of it."
Fast-food chains such as Burger King Worldwide Inc BKW.N, Wendy's Co (WEN.O) and Yum Brand Inc's (YUM.N) Taco Bell, have overhauled menus to compete with McDonald's and benefited from lower commodity costs, which have helped them to lower prices, Morningstar analyst R.J. Hottovy said.
"Competition has certainly gotten more aggressive the past several quarters," said Hottovy, who described the environment as "cut-throat."
McDonald's global sales at restaurants open at least 13 months rose 1.9 percent, the first gain of less than 2 percent since the second quarter of 2003.
That result just missed the 2 percent increase that analysts polled by Consensus Metrix had expected because of shortfalls in the United States and the Asia/Pacific, Middle East and Africa (APMEA) region.
Europe, which just edges out the United States as the company's top market for sales, topped expectations despite a drop in traffic after the company honed in on value-priced meals.
McDonald's has beefed up advertising to fend off its reenergized rivals, and analysts expect its size and management prowess will work to the company's advantage.
"This chain will just have to grind through this. We're confident they can do this with their brand power and their advertising budget," Edward Jones analyst Jack Russo said.
Shares of other restaurant operators also fell on Friday. Chipotle shed 15.4 percent to $241.85, after falling as low intraday as $239.55, its lowest level in well over a year. Yum was off 2.6 percent at $70.18, and Starbucks Corp (SBUX.O) sank 3.7 percent to $45.67.
Income at McDonald's fell 3.5 percent to $1.46 billion, or $1.43 per share, in the third quarter. Analysts, on average, expected McDonald's to earn $1.47 per share, according to Thomson Reuters I/B/E/S.
The impact of the stronger dollar, which decreases the value of sales overseas for U.S. companies, trimmed earnings by 8 cents per share.
Total sales slipped 0.2 percent to $7.15 billion.
During September, comparable sales were up 0.7 percent in the United States, 3 percent in Europe and 0.1 percent for the Asia/Pacific, Middle East and Africa (APMEA) region.
While the results from the United States and APMEA region disappointed Wall Street, Europe handily topped expectations, according to Consensus Metrix.
(Additional reporting by Brad Dorfman in Chicago; Editing by Gerald E. McCormick, Dale Hudson, Jeffrey Benkoe and Jan Paschal)