McDonald's profits rise on back of buoyant sales


McDONALD’S RESTAURANT chain reported higher quarterly profit yesterday, boosted by better than expected sales at established restaurants in the United States and its top revenue market of Europe.

McDonald’s shares rose 2.1 per cent as investors breathed a sigh of relief over results from Europe, where debt woes, widespread austerity measures and high unemployment have made demand for American fast-food volatile.

The first-quarter results, boosted by a focus on low-priced food, new menu items, restaurant makeovers and longer operating hours, helped McDonald’s continue to outpace rivals like Wendy’s and Burger King.

Sales at restaurants open at least 13 months were up 7.3 per cent, more than the 6.7 per cent increase expected by analysts. Same-restaurant sales rose 5 per cent in Europe and 8.9 per cent in the United States, where mild weather helped lift sales.

“People have been most concerned about Europe and it looks like it’s okay,” said Bernstein Research analyst Sara Senatore.

Investors had good reason for caution. McDonald’s global same-restaurant sales for February missed Wall Street’s target due to a harsh winter and economic upheaval in Europe.

Europe’s results for March, reported yesterday, topped expectations as McDonald’s increased its focus on low-cost food offered via Germany’s “value menu” and the UK’s “saver menu”.

“France is also evaluating options to further strengthen value perceptions at a time when a number of new austerity measures are impacting consumers’ confidence and their disposable income,” said chief operating officer Don Thompson, who will succeed retiring chief executive Jim Skinner in July.

First-quarter net income rose almost 5 per cent to $1.27 billion, or $1.23 per share, in line with analysts’ forecasts. “If it weren’t for higher food cost, the numbers in terms of earnings growth would have been better,” said Edward Jones analyst Jack Russo .

Revenue jumped 7 per cent to $6.55 billion. In Asia/Pacific, Middle East and Africa first-quarter same-restaurant sales were up 5.5 per cent, slightly below expectations, due to lower franchise margins. – (Reuters)