honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Wednesday, September 10, 2008

McDonald's impressive with rise in global sales

By Lauren Shepherd
Associated Press

Hawaii news photo - The Honolulu Advertiser

Stefan Nicola eats a Big Mac hamburger in the Kreuzberg neighborhood of Berlin, Germany. McDonald's Corp. reported a second-quarter profit that exceeded analysts' estimates.

BLOOMBERG NEWS SERVICE FILE PHOTO | July 2008

spacer spacer

NEW YORK — Overseas consumers spent more at McDonald's Corp. in August, leading the nation's No. 1 hamburger chain to surprise investors by posting a big rise yesterday in global same-store sales.

The chain said its worldwide same-store sales, or sales at locations open at least a year, jumped 8.5 percent during the month.

Same-store sales are a key indicator of restaurant performance since they measure growth at existing locations rather than newly opened ones.

The increase follows a rise in global same-store sales of 8 percent in July and compares with a boost of 8.1 percent in August last year.

Analysts were largely expecting a lower increase, with U.S. consumers cutting back on spending, pockets of economic weakness appearing in some overseas markets and the dollar strengthening against currencies abroad.

"It's a real strong performance," said Morningstar analyst John Owens. "It's impressive."

Same-store sales grew in every region. In the U.S., the chain said they rose 4.5 percent, driven by the company's breakfast menu, a promotion tied to the Olympics for the Southern Style Chicken sandwich and biscuit, and "everyday affordability" with a focus on beverages. In August, McDonald's priced its Sweet Tea at $1 nationwide.

The rise in U.S. same-store sales, though, fell short of the 6.7 percent jump in July and the 7.4 percent rise the company recorded last August.

Most restaurant chains are seeing slower sales this year as consumers cut back on discretionary spending due to high gas prices, tight credit and the weak housing market. McDonald's — with its dollar menu and fast service — has fared better than most, but the chain has said it is not immune to the effects of the economic slowdown.

Still, the U.S. bump either met or beat the expectations of most Wall Street analysts.

Owens said the chain served more customers during the month and also may have benefited from price increases made during the past quarter.

The big surprise was the strong performance of the chain's overseas locations.

In Europe, where the economy is also slowing down in some areas, same-store sales climbed 11.6 percent. Performance was particularly strong in the U.K., France and Germany, McDonald's added. Same-store sales jumped 10 percent in the Asia-Pacific, Middle East and Africa division, helped by promotions tied to the Olympics in Beijing.

Systemwide sales, which includes franchisees, rose 14 percent during the month worldwide and rose 5 percent in the U.S.