Tuesday, January 27, 2009

McDonald's to Expand, Posting Strong Results

The Wall Street Journal - As many restaurants have struggled to keep their doors open, McDonald's Corp. reported strong fourth-quarter results and said it will have 650 more outlets by year end.

The developments show how consumers are shifting their behavior in a way that favors McDonald's while hurting midprice, sit-down chains and independent eateries. McDonald's low prices and efforts to broaden its menu with more chicken, beverage and breakfast items are helping the company grow despite the recession.

Same-store sales, a key measure of restaurants' health, rose 7.2%. Earnings at the world's largest restaurant chain by sales declined 23% to $985.3 million, or 87 cents a share, in the fourth quarter from $1.27 billion, or $1.06 a share, a year earlier when it had a 33-cent gain from tax items. McDonald's total revenue fell 3.3% to $5.57 billion because of currency translations.

"We do so well because our strategies have been so well planned out," Jim Skinner, McDonald's chief executive, said in an interview Monday. McDonald's serves 58 million customers a day -- two million more than a year ago.

Analysts expect that this year will be another dismal one for most restaurant chains, extending a downturn that started in 2006. Yet McDonald's plans to spend $2.1 billion this year to remodel restaurants and build new ones at a slightly more rapid pace than in recent years.

Analysts said McDonald's potential to keep exceeding expectations is limited, however, and that it could become more difficult for the company to keep topping its strong sales results. Among the challenges is that the rising dollar is diluting the benefit the chain has received from overseas.

Also, McDonald's big U.S. initiative adding lattes, cappuccinos and other upscale coffee drinks -- which are now in 7,000 locations -- comes as budget-conscious consumers are cutting back on such extravagances. Mr. Skinner said the coffee program is on track and that he doesn't think its rollout was ill-timed. "You have to remember that everything we do at McDonald's is for the long term," he said.http://online.wsj.com/article/SB123296471149515055.html?mod=wsjcrmain


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