McDonald's, the world's largest restaurant chain, said Monday global May sales were up a stronger-than-expected 7.7 percent at established restaurants, and its shares rose more than 4 percent.
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)
Overseas sales drove the results and have been outpacing domestic results for some time at McDonald's , which has been heavily promoting its Dollar Menu during the current U.S. economic slowdown.
Same-store sales, a key gauge of retail health, rose 4.3 percent at U.S. McDonald's restaurants open at least 13 months.
The Oak Brook, Illinois-based hamburger chain said its new Southern Style Chicken biscuit breakfast sandwich helped boost domestic results.
Low-priced menu items, such as a $1 double cheeseburger, have been helping McDonald's weather the U.S. economic downturn by driving traffic and luring cash-strapped diners away from higher-priced sit-down restaurants.
UBS Investment Research analyst David Palmer said in a client note that he was looking for a 3 percent rise in U.S. May sales, while analysts' average call was for an increase of 1 percent.
"We believe this bodes very well for U.S. QSR," said Stifel Nicolaus analyst Steve West, referring to fast-food restaurants, also called "quick-service restaurants." Same-store sales rose 9.6 percent in Europe, led by strength in Britain, France and Russia, and 9.7 percent in the Asia/Pacific, Middle East and Africa division.
Palmer, who said McDonald's topped analysts' targets in all markets, said same-store sales continue to be very strong in Europe.
"It is notable that the UK continues to be the biggest growth driver in spite of that country's economy slowing the most out of (McDonald's) major markets in Europe," he said.
He said the results are being boosted by McDonald's value menus, its ongoing restaurant renovation program and new menu items.
Based on the May results, Palmer raised his second-quarter earnings forecast by 2 cents to 84 cents per share while West took his estimate up 6 cents to call for earnings of 86 cents per share.
Shares in McDonald's which reached $59.55 in early trading, were up 4 percent, or $2.26, at $59.21 at midday on the New York Stock Exchange.