020919 McDonald's Shares Hit 7-Year Low

Chicago - McDonald's Corp.'s long-slumping stock tumbled to a seven-year low after analysts expressed doubt the burger chain is on track to revive sluggish U.S. sales.

Despite its long reign as the world's No. 1 restaurant company, McDonald's has seen its once- runaway growth stumble recently due to a weakened economy, mad cow disease scares overseas and a saturated U.S. fast-food market.

The latest bout of Wall Street pessimism sent its blue-chip stock below dlrs 20 a share for the first time since October 1995 -- down nearly 60% since peaking at dlrs 49.56 on Nov. 12, 1999. In afternoon trading on the New York Stock Exchange, McDonald's shares were down dlrs 1.05 cents, or 5%, at dlrs 20.29 in heavy volume after sinking as low as dlrs 19.89.

Several securities brokerages issued reports voicing skepticism that McDonald's can jump-start U.S. sales with its plan to offer lower-priced menu items and revamp older restaurants.

They also suggested the company may not have impressive numbers to report next Tuesday when it provides its mid-quarter update and discusses its new strategy in more detail.

"We believe that the approach McDonald's is taking does not do enough to fix what customers complain about most: rude service, slow service, unprofessional employees and inaccurate service," analyst Mark Kalinowski of Salomon Smith Barney said in a research note.

Goldman Sachs' Coralie Tournier Witter noted high financial uncertainties at the fast-food giant and suggested its new initiative will dilute its focus.

CIBC analyst John Glass said he thinks the company may acknowledge Tuesday that it will fall short of the 42-cents-per-share earnings and dlrs 4.15 billion in revenue expected by a consensus of analysts surveyed by Thomson First Call.

McDonald's spokesmen did not immediately return a phone call seeking comment Thursday.

Previewing its new U.S. strategy, the company issued a brief statement last Friday saying it will begin selling the Big 'N' Tasty and McChicken sandwiches for dlrs 1 each next month, followed by an eight-item "Dollar Menu" in November. It said the program also entails customer service initiatives, particularly during the lunchtime rush, and investments in its restaurant facilities ranging from new signs to improved drive-thrus to complete remodelings.

Mike Roberts, president of McDonald's USA, did not cite a cost for the investments. But he said the set of initiatives should improve the customer experience and enable McDonald's to meet short- and long-term goals.

Rival Burger King also is making a push on budget items.

McDonald's has more than 30,000 restaurants in 121 countries, including more than 13,200 in the United States. It had profits of dlrs 497.5 million in the second quarter, ending a string of six consecutive quarters with lower earnings.

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