McDonald's Corp reported a quarterly profit that handily topped Wall Street estimates, but its sales fell short, due in part to a December slowdown in Europe and Asia.
Shares of the world's largest hamburger chain were fractionally higher in late-morning trade after falling as much as 2.6% earlier in the session.
McDonald's posted a 5.8% rise in worldwide December sales at restaurants open at least 13 months. That is a slowdown from November and October, when same-store sales rose 7.7% and 8.2%, respectively.
Jack Russo, an analyst at Edward Jones, said the slowdown was most prominent in international markets and was a signal that the “rest of the world is catching up” to a US recession.
Many restaurant operators are struggling with falling sales amid the global economic slowdown, as consumers cook more at home instead of dining out. McDonald's, which offers a range of menu items for $1, has long been hailed as one of the industry's best performers.
“It shows the slowdown is affecting everybody at this point,” Russo said. “But compared to the other carnage out there, these guys are still doing pretty good.”
Fourth-quarter net income fell 23% to $985.3 million, or 87 cents per share, from $1.27 billion, or $1.06 per share, a year earlier, when results included a large tax-related benefit.
Analysts on average were expecting profit of 83 cents per share, according to Reuters Estimates.
Revenue fell 3% to $5.57 billion, below the nearly $5.7 billion expected by Wall Street. McDonald's said it was hit by a stronger dollar in many foreign markets, including Canada, Europe, Britain and Australia.
Global same-store sales rose 7.2% in the quarter. Same-store sales rose 10% in the Asia/Pacific, Middle East and Africa markets, 7.6% in Europe and 5% in the United States.
In Europe, same-store sales rose 5.4% in December, compared with rates of 9.8% in October and 7.8% in November. The Asia segment had a December rise of 5.7%, versus 11.5% in October and 13.2% in November.
McDonald's said its US business benefited from the addition of the Southern Style Chicken biscuit and sandwich, improved service at its drive-through windows, and the expansion of its high-end coffee drinks.
“McDonald's has been doing an exceptional job in providing new reasons to come into their stores,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments, citing new sandwiches, iced coffees and sweet tea. “But the fact that they provide a good value doesn't hurt either.”
OakBrook, based in Lisle, Ill., owns 316,000 McDonald's shares among $1.2 billion in assets under management.
For 2009, McDonald's forecast capital spending of $2.1 billion, with about half of the total being invested in existing restaurants and the rest being used to open about 1,000 new restaurants.
It forecast 2009 food costs would rise 5% to 5.5% in the United States and 4% to 4.5% in Europe. (Reuters)