CNN Money
McDonald's Corp. (MCD) fourth-quarter earnings rose 23% as the restaurant giant increased same-store sales across all regions despite a global downturn, offering hope for the struggling fast-food industry.
McDonald's also reported stronger results in December, with same-store sales rising 1% in the U.S. after two months of decline, and said trends continued to improve in January, with customers responding favorably to the chain's mix of value and premium items.
Shares of the world's largest restaurant chain rose 1.5% in recent trading to $64.16, and helped lift other fast-food players like Burger King Holdings Inc. ( BKC), up 2.5% to $18.20, and Wendy's/Arby's Group Inc. (WEN), up 3% to $4.78.
McDonald's executives tempered budding signs of improvement with gloomy environment for jobs. Chairman and Chief Executive Jim Skinner said on a call with analysts that until job creation materializes, "we're not going to see enormous pickups or a big change relative to trends in consumer spending."
Still, the chain is taking the downturn as an opportunity to widen its lead in the fast-food market, which it sees as shrinking. It's attracting customers with value, including a new Dollar Menu at breakfast that it is making permanent, and also new snack items, like Mac Snack Wrap - a version of a Big Mac in a tortilla - priced around $1.49.
Unlike some other chains who have slashed prices on existing items, McDonald's hasn't let its low-priced food eat into margins as much as other fast-food chains. Goldman Sachs restaurant analyst Steven Kron noted that McDonald's was able to increase U.S. same-store sales and improve its margins, a feat that's "a pretty rare occurrence these days in" the fast-food industry.
"There's very little not to like here," Kron said. "Traffic-driving initiatives aren't coming at the expense of margins."
McDonald's is complementing the value-items with premium products, like espresso-based coffee and Angus burgers, which are helping avoid having its average check decline. Such a strategy has grown in importance as McDonald's says is losing the ability to raise prices annually, as restaurant chains have typically done to keep pace with inflation. McDonald's says that avoiding price increases helped it add customer traffic in 2009.
"Our consumers today around the world deserve a break," Skinner said.
For the quarter, McDonald's profit rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents, a year earlier. The latest period included an 8-cent benefit related to the resolution of a 2007 license transaction while currency changes added 7 cents to the bottom line.
Revenue increased 7% to $5.97 billion. Same-store sales, or sales at restaurants open at least 13 months, rose 2.3% globally. The company hasn't posted a quarter of global same-store sales declines since early 2003.
Analysts polled by Thomson Reuters most recently forecast earnings of $1.02 on revenue of $5.94 billion.
McDonald's also reported stronger results in December, with same-store sales rising 1% in the U.S. after two months of decline, and said trends continued to improve in January, with customers responding favorably to the chain's mix of value and premium items.
Shares of the world's largest restaurant chain rose 1.5% in recent trading to $64.16, and helped lift other fast-food players like Burger King Holdings Inc. ( BKC), up 2.5% to $18.20, and Wendy's/Arby's Group Inc. (WEN), up 3% to $4.78.
McDonald's executives tempered budding signs of improvement with gloomy environment for jobs. Chairman and Chief Executive Jim Skinner said on a call with analysts that until job creation materializes, "we're not going to see enormous pickups or a big change relative to trends in consumer spending."
Still, the chain is taking the downturn as an opportunity to widen its lead in the fast-food market, which it sees as shrinking. It's attracting customers with value, including a new Dollar Menu at breakfast that it is making permanent, and also new snack items, like Mac Snack Wrap - a version of a Big Mac in a tortilla - priced around $1.49.
Unlike some other chains who have slashed prices on existing items, McDonald's hasn't let its low-priced food eat into margins as much as other fast-food chains. Goldman Sachs restaurant analyst Steven Kron noted that McDonald's was able to increase U.S. same-store sales and improve its margins, a feat that's "a pretty rare occurrence these days in" the fast-food industry.
"There's very little not to like here," Kron said. "Traffic-driving initiatives aren't coming at the expense of margins."
McDonald's is complementing the value-items with premium products, like espresso-based coffee and Angus burgers, which are helping avoid having its average check decline. Such a strategy has grown in importance as McDonald's says is losing the ability to raise prices annually, as restaurant chains have typically done to keep pace with inflation. McDonald's says that avoiding price increases helped it add customer traffic in 2009.
"Our consumers today around the world deserve a break," Skinner said.
For the quarter, McDonald's profit rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents, a year earlier. The latest period included an 8-cent benefit related to the resolution of a 2007 license transaction while currency changes added 7 cents to the bottom line.
Revenue increased 7% to $5.97 billion. Same-store sales, or sales at restaurants open at least 13 months, rose 2.3% globally. The company hasn't posted a quarter of global same-store sales declines since early 2003.
Analysts polled by Thomson Reuters most recently forecast earnings of $1.02 on revenue of $5.94 billion.
