McDonald’s Net Up 1.4%, U.S. Business Rebounds

  McDonald’s Corp.’s (MCD) fourth-quarter profit rose 1.4% as the company’s U.S. sales trends rebounded and its profitability improved, though business in Europe and Japan continued to lag.

McDonald’s, the world’s largest fast-food chain, has seen its quick fixes for the U.S. business prove successful. It recently went back to advertising its “Dollar Menu”, rather than some higher-priced items; it shifted its annual McRib limited-time offering to December; and it encouraged restaurants to stay open Christmas Day. U.S. sales at restaurants open at least 13 months, called same-store sales, rose 0.9% in December.

However, negative customer traffic in Europe and continued weakness in Japan offset its U.S. recovery, leading to flat global same-store sales last month. And the company expects to return to a decline in January for the metric, which tends to be a key indicator of restaurant chains’ health.

Last October, McDonald’s faced its first global decline in monthly same-store sales in nearly a decade, causing concern among investors about its ability to maintain its leading position in the fast-food industry.
McDonald’s has touted that its global scale and mix of value-oriented and higher-priced menu items help it return a profit even during tough economic times. But lately, higher food costs and lower consumer confidence have hurt the once-resilient restaurant chain. Meanwhile, its rivals, such as Burger King Worldwide Inc. (BKW) and Wendy’s Co. (WEN), are intensifying competition with revamped menus and marketing campaigns.

McDonald’s Chief Executive Don Thompson says that the company’s top- and bottom-line growth will “remain pressured” in the near term, but adds that, “moving forward, we remain focused on seizing the long-term opportunities in the global marketplace by leveraging our competitive advantages … to navigate the current environment.”

McDonald’s shares were recently up a fraction in Wednesday’s premarket trading to $93.23. So far this year, the stock has rebounded about 5%, after ending 2012 with a cumulative loss of nearly 10%.
In the recent quarter, McDonald’s improved its operating margin to 31.6% from 31.1% the prior year, surprising the market with the growth.

McDonald’s global same-store sales increased 0.1%, in line with analysts’ expectations, for the fourth quarter. By region, same-store sales rose 0.3% in the U.S.; fell 0.6% in Europe; fell 1.7% in the Asia/Pacific, Middle East and Africa region; and rose 5.4% in Canada and Latin America.

McDonald’s reported a profit of $1.4 billion, or $1.38 a share, up from $1.38 billion, or $1.33 a share, a year earlier. Revenue grew 1.9% to $6.95 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $1.33 a share on revenue of $6.89 billion.  

Source: Dow Jones