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Economy biting into McDonald's

McDonald's reported flat sales in July at established restaurants around the world, its worst performance in more than nine years and a signal that a weakening global economy is taking a bite out of mainstream diners' discretionary spending.

McDonald's reported flat sales in July at established restaurants around the world, its worst performance in more than nine years and a signal that a weakening global economy is taking a bite out of mainstream diners' discretionary spending.

The results came in far below Wall Street's expectation and marked the first time since April 2003 that sales at restaurants open at least 13 months did not rise.

Shares of the world's biggest hamburger chain were down 1.6 per cent at $87.56 in trading. The stock has fallen more than 14 per cent from its peak of $102.22 in January.

"We've grown used to seeing McDonald's weather bad economies, so this is a bit of a surprise," RBC Capital analyst Larry Miller said.

Just two weeks ago, McDonald's said it had expected worldwide July sales at restaurants open at least 13 months to rise, but not as much as the 3.7 per cent gain reported in the second quarter.

"It's clear that the consumer is starting to cut back," Edward Jones analyst Jack Russo said.

After months of outpacing rivals, it appeared McDonald's ceded a bit of market share in July.

Burger King Worldwide Inc. is among the fast-food chains that have stepped up their game with new food and promotions. It has been blitzing diners with sexy ads starring the likes of soccer star David Beckham and silver-screen siren Salma Hayek.

July sales in the U.S. and Europe were down 0.1 per cent and 0.6 per cent, respectively.

Same-restaurant sales from the Asia/Pacific, Middle East and Africa region were down 1.5 per cent.