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McDonald's Sees First-Quarter Profit Above Expectations

Reuters
Friday, 13 Apr 2007 | 11:47 AM ET
A McDonalds sign welcomes patrons into the restaurant in Wilmington, Del., Wednesday, Jan. 24, 2007. McDonald's Corp., the world's largest fast-food chain, says its fourth-quarter profit more than doubled, thanks in large part to the spinoff of a burrito chain and strong sales in Europe. (AP Photo/Chris Gardner)
Chris Gardner
A McDonalds sign welcomes patrons into the restaurant in Wilmington, Del., Wednesday, Jan. 24, 2007. McDonald's Corp., the world's largest fast-food chain, says its fourth-quarter profit more than doubled, thanks in large part to the spinoff of a burrito chain and strong sales in Europe. (AP Photo/Chris Gardner)

McDonald's on Friday gave a first-quarter earnings outlook above analysts' expectations, citing strength of new U.S. products such as Snack Wrap chicken sandwiches and growth in Europe and Asia.

The world's largest restaurant company also reported a rise of 8.2% in March sales at restaurants open at least 13 months. Four analysts, on average, had been expecting a rise of 3.6%, according to research notes.

“The management is very good,” David Palmer, senior restaurant analyst at UBS, told CNBC. “These guys are gaining market share rapidly in the U.S. and Europe – and there’s nothing special going on in terms of the industry.”

McDonald's said it expects first-quarter earnings of about 62 cents a share. That view includes a 1 cent a share benefit from foreign currency translation and reflects a tax rate of about 30%.

Analysts, on average, had looked for a profit of 57 cents a share, according to Reuters Estimates.

Shares of McDonald's rose 1.6% to $47.37 in early electronic trading.

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March same-store sales rose 6.2% in the United States, 11.2% in Europe, and 9.6% in the company's Asia-Pacific business, it said.

Initiatives such as a focus on breakfast and extended restaurant hours have been key to revitalizing performance at McDonald's U.S. business over the last three years. Most recently, the chicken Snack Wrap introduced last year has proven to be a blockbuster.

McDonald's said gains in the United States were also aided by the "everyday affordability" of its menu, which drove customers to its restaurants.

The European business has also undergone a turnaround in the last year, helped by the company's strategy of combining higher-priced products with cheaper selections on its menu.

France, Germany, the United Kingdom and Russia led growth in the region.

First-quarter systemwide sales, which include sales at all restaurants, including franchised locations and those run by affiliates, rose 10.3%, while same-store sales increased 6.3%.

Quarterly same-store sales were up 4.4% in the United States, 8% in Europe and 8.5% in the Asia-Pacific region.

McDonald's plans to announce quarterly earnings on April 20.

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