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McDonald’s rebounds in Europe

09 February 2011 00:43 (UTC +04:00)

Baku-APA. McDonald’s Corp (MCD.N) posted stronger-than-expected global sales at established restaurants as demand in Europe rebounded, coming in far above Wall Street estimates, APA reports quoting news.yahoo.com website.
The results sent McDonald’s shares up more than 3 percent in morning trading.
"Europe was the concern, and Europe blew it through," Oppenheimer analyst Matt DiFrisco said. "That will give people a little bit of increased confidence."
Sales at restaurants in Europe open at least 13 months jumped 7 percent in January, well above the 3.7 percent rise analysts had expected. This was also a significant improvement from December, when sales in the region fell 0.5 percent and rattled investors.
Europe is McDonald’s largest market for sales, contributing about 40 percent of revenue.
McDonald’s attributed the outsize gain in Europe to strong results from Germany, Britain, France and Russia.
The world’s biggest hamburger chain also said new products, longer store hours and refurbished restaurants helped bolster results.
Morningstar analyst R.J. Hottovy called the sales rebound encouraging, especially given the threat from austerity measures and continuing economic challenges in the region.
"They have exposure to the stronger markets in Europe," said Hottovy, referring especially to Germany. Also, he said, McDonald’s is still an inexpensive meal option.
Worldwide, January same-restaurant sales were up 5.3 percent, above the 4.4 percent growth analysts had expected.
In the United States, where high unemployment continues to weigh on the fast-food business, sales rose 3.1 percent. That was below the 4.4 percent gain analysts had expected for January, but better than the 2.6 percent rise reported in December.
"Given where we are in the economic recovery, the result is good," said Peter Jankovskis, co-chief investment officer at Oakbrook Investments.
The company’s broad menu -- which offers low-priced and premium food and drinks that appeal to people of all ages -- has helped it outperform rivals that tend to focus on young males, who have been hit particularly hard by job cuts.
McDonald’s said hot chocolate and caramel mochas as well as its new hot oatmeal contributed to the January sales increase in the United States, which accounts for about 35 percent of overall revenue.
Sales in the Asia/Pacific, Middle East and Africa unit rose 5.2 percent, above the 4.6 percent increase analysts had expected. Results in the region benefited from menu items tailored to local areas, low-priced food and convenience efforts such as drive-thrus.
In December, APMEA’s same-restaurant sales jumped 8.9 percent.
Shares of McDonald’s were up 3.2 percent at $75.81 on the New York Stock Exchange, where rival Wendy’s/Arby’s Group (WEN.N) was down 1.1 percent.
PRICE HIKES?
Restaurants companies like McDonald’s and Starbucks Corp (SBUX.O) are either raising prices or planning such moves to help cover higher costs for items like beef, produce, dairy and coffee. It remains to be seen whether diners will accept the higher prices.
McDonald’s already has announced price hikes in China, where food prices have spiked. Analysts expect the company to make modest and selective price increases in other parts of the world this year.
"I think they have a better chance of doing it than most," said Jankovskis, who added that McDonald’s also works closely with its suppliers and is capable of also containing some cost increases that way.
"They can balance those two out," Jankovskis said.