New products help boost McDonald's sales for 16th month

By Dave Carpenter
Associated Press

CHICAGO — New menu items helped lift McDonald's Corp. to a 16th consecutive increase in monthly comparable sales, and the fast-food giant has more sandwiches on the way.

The recent launch of Chicken Selects contributed to a better-than-expected 7.2 percent jump in same-store sales at McDonald's 13,600 U.S. restaurants, the company said yesterday in reporting August results.

The Oak Brook, Ill.-based chain posted a 3.9 percent gain in comparable sales worldwide, extending its momentum from a recovery that began in spring 2003. That came despite a 2.1 percent drop in Europe, blamed on weak sales in Germany, poor weather and a decline in tourism across the continent.

McDonald's attributed its strong U.S. showing to improved service, marketing efforts and its expanded menu, including the late-July launch of Chicken Selects. The premium fried chicken strips come after the successful introductions since early last year of entree-size salads, McGriddles breakfast sandwiches and white-meat chicken nuggets, which collectively increased the size of the average customer's bill.

"We've had much more new product success in the last 18 months than we've had since the launch of Chicken McNuggets" in 1982, CEO Charlie Bell said in a presentation to the Goldman Sachs Global Retailing Conference in New York.

With the McDonald's brand popular and in demand, he said, "customers are giving us permission to expand our boundaries."

The next offering may be Oven Selects, a line of five toasted delicatessen-style sandwiches being test-marketed at more than 400 McDonald's in Columbus, Ohio; Louisville, Ky.; Richmond, Va.; San Antonio, Texas; and Rockford and Lisle, Ill. Similar tests are planned for Canada and Australia.

The sandwiches cost about $4 and include Turkey BLT, Crispy Buffalo Chicken, Beef n' Provolone, Leaning Tower Italian and New York Reuben, on toasted French rolls or rye bread.

Bell said it will be a few months before a decision is made whether to add the sandwiches to the core menu.

"If it's a go, you could see it potentially rolled out in certain markets in a year's time," he said. "If not, we've got some other things in the pipeline that we're also excited about that could take its place."

J.P. Morgan analyst John Ivankoe said McDonald's U.S. August sales increase was particularly impressive considering it was up against tough comparisons with last year's rebound.

"We expect continued strong consumer demand for the new higher-priced and higher-quality Chicken Selects to allow the brand to continue recent average check gains," he said in a note to investors.

McDonald's stock rose 12 cents to close at $27.50 yesterday on the New York Stock Exchange.