Fast-food group McDonald's has said it will cut new openings and focus on existing restaurants, after reporting another drop in earnings.

But the company, synonymous with burger-and-fries dinners, also warned that it may have to make a number of job cuts.

News of the new strategy cheered investors and was McDonal's was rewarded with a 9% increase in its share price.

This year has proven to be even ore challenging than we had anticipated

Jack Greenberg, chairman

The drop in earnings had been widely expected after the company was forced to issue a profit warning last month.

Analysts focused instead on hopes that a less ambitious opening programme would allow McDonald's to revive flagging sales.

'Dramatic reduction'

McDonald's said it would now open just 600 new fast-food outlets next year, compared with a scheduled 1,300 openings in 2002.

That was already a reduction from its peak of 2,000 in 1996.

But analysts said this would allow the fast food company to focus on existing restaurants, where sales fell 3% in the three month period.

Chairman and chief executive Jack Greenberg said the company could also be forced to cut jobs after a review of the company's costs.

"It is likely there will be some job losses. We hope that it won't be significant, but we dont' know yet," said Mr Greenberg.

US leads the fall

The biggest fall in sales came in the US where outlets open for more than a year saw a 2.8% drop.

In Europe, McDonald's reported a 1.3% fall.

Are burgers and fries losing their appeal?

McDonald's is now launching a more value-driven menu, starting with its nationwide $1 offering earlier this month.

News of the cut in openings came as McDonald's reported income of $486m for the three months to the end of September, down 11% from $545m this time last year.

This is the seventh quarter, or three-month period, out of the last eight that McDonald's has reported a drop in earnings.

Tougher than expected

Mr Greenberg said: "This year certainly has proven to be even more challenging than we had anticipated."

The group warned that it would need to see a "significant improvement" in trading to meet full year expectations.

Nonetheless, investors warmed to news of the reduced openings.

McDonald's shares, which had lost more than one quarter of their value over the past year, jumped $1.80 to $19.50.