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UPDATE 2-McDonald's beats sales forecast on new deals, store revamp

Nivedita Balu and Aishwarya Venugopal

(Adds analyst comment, industry background, updates shares)

July 26 (Reuters) - McDonald's Corp beat quarterly sales expectations at established U.S. restaurants on Friday, as the world's largest burger chain's attracted more diners with upgraded stores and new promotions, such as the 2 for $5 Mix and Match deal.

The company's stock, a component of the blue-chip Dow Jones Industrial index, rose as much as 2% to a record high of $218.96 in morning trading, the third major restaurant chain to hit a peak this week.

McDonald's is the latest restaurant chain to report solid growth driven by new menu additions, expanded delivery services and tech-enhanced stores after strong U.S. sales numbers from Chipotle Mexican Grill Inc and Starbucks Corp.

"These three (companies) are using their operating scale and their business strength to essentially outflank smaller competitors and generate very strong sales growth and bottom line profits," Telsey Advisory Group analyst Bob Derrington said.

The U.S. restaurant market has been stagnant with lower customer traffic in recent years, dogged by increasing number of competitors among fast-food chains and the entry of delivery services such as DoorDash and Uber Eats, forcing established chains to find new ways of attracting and retaining customers.

McDonald's, like many of its peers, has been remodeling its 14,000 restaurants in the United States - its biggest market - by introducing digital ordering kiosks and new mobile order, pay and pickup services to replicate the success of such upgrades in driving growth abroad. The Chicago-headquartered company has also tweaked its menu by offering national deals $1, $2, $3 Menu as well as greater variety of breakfast menus and switched many of its burgers to fresh-beef patties from frozen ones to woo diners in a saturated market.

Sales at U.S. restaurants open for at least 13 months rose 5.7% in the second quarter ended June 30, above the 4.47% growth expected by analysts, according to IBES data from Refinitiv.

Globally, same-store sales rose 6.5%, also topping estimates of 5.08%, helped by strong performance in UK, France and Germany. (Graphic: https://tmsnrt.rs/2yd7dnM)

"By engaging our guests on their terms, whether it's through delivery, an enhanced dining experience ... or through our evolving digital offerings, we're becoming a better McDonald's," Chief Executive Officer Steve Easterbrook said in a statement.

Total revenue was flat at $5.34 billion, still slightly above expectations of $5.33 billion.

Net income rose 1.38% to $1.52 billion. Excluding one-time items, McDonald's earned $2.05 per share, meeting Wall Street expectations.

(Reporting by Aishwarya Venugopal and Nivedita Balu in Bengaluru Editing by Tomasz Janowski)