030134 McDonald's Stays with Discounts, Stock Off

CHICAGO - McDonald's Corp. will hold fast to its much-criticized price-discounting "Dollar Menu," the No. 1 restaurant company's new chief executive said, but he failed to impress investors who sent the company's shares down more than 6%.

Chief Executive Jim Cantalupo, addressing Wall Street for the first time in his new post, also told investors that the company would not provide much-watched quarterly earnings guidance for 2003.

By dropping the guidance, it adds its name a list that includes well-known consumer companies Coca- Cola Co. and Gillette Co..

McDonald's expects to report its first-ever loss when it releases fourth quarter results next week.

The company will also close more of its 30,000 stores in its major markets of Japan and the United States in order to improve profits, Cantalupo said, without giving details. McDonald's announced late last year that it would pull out of some underperforming foreign markets, close about 175 stores, and slash up to 600 corporate jobs.

Shares of McDonald's fell shortly after Cantalupo began speaking and were off 85 cents, or about 5%, at $15.82 in midday trading.

"It's lack of information," said Victory Capital Management analyst David Kolpak, which held 2.6 million McDonald's shares through 2002. "We learned virtually nothing new. The company would have been better off waiting one week to say anything than to hold a meeting in which well-publicized problems were restated."

Oak Brook, Illinois-based McDonald's, which has been embroiled in a price war with No. 2 hamburger rival Burger King, adopted its discount menu to help drive up traffic in the United States, its largest market with some 13,000 hamburger units.

"Given today's show-me-the money environment, I accept your skepticism," Cantalupo said of criticism from investors, who have bid McDonald's shares down some 40% over the last year. He added, "I support our 'Dollar Menu.' Everyday value has always been important to McDonald's and the industry."

Analysts have held that the "Dollar Menu" is largely responsible for weakening U.S. sales in the fourth quarter, especially since the company added higher-margin items like its Big 'N Tasty hamburger.

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