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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Call it the economy - French flock to Big Macs

Bloomberg News - It's lunchtime in Paris, and the packed restaurant has neither checkered tablecloths nor carafes of red wine. It's a McDonald's, and the French are lovin' it.

While rising prices and record low consumer confidence drive the French to throw their culinary pride to the wind and embrace le Big Mac, traditional bistros are hurting. About 3,000 independent French restaurants filed for bankruptcy in the first half of the year, a record 27 percent more than a year earlier, according to Paris-based statistics office Insee.

Meanwhile, France has cemented its position as McDonald's Corp.'s biggest earner outside the U.S., accounting for 13 percent of total sales.

"A hamburger patty and fries in a bistro around the corner from my office costs almost twice as much," said Alexandre Cavanel, a 27-year-old computer programmer, as he tucked into his 8-euro ($10.70) double-cheeseburger menu meal with colleagues at a McDonald's in Paris' Opera district.

McDonald's, accused by Jose Bove, an activist farmer who ran last year for president, of serving malbouffe, or junk food, said revenue in France will increase 12 percent this year.

In contrast, the fate of traditional French restaurants might worsen as a slumping economy drives more people to swap offerings such as duck dish confit de canard and blanquette of veal for hamburgers and fries, economists said.

France might have slipped into its first recession in more than 15 years in the third quarter, Insee said. Consumer spending will stagnate for the rest of 2008 as employment and the real-estate market deteriorate and credit for new investment dries up, the statistics office said.

"Clearly, the current economic environment speaks in favor of cheaper products," said Dominique Barbet, an economist at BNP Paribas SA in Paris.

Many French restaurateurs and cafe owners are concerned that rising prices and growing unemployment, combined with the global financial crisis, will stop people from dining out in one of the world's most pervasive restaurant cultures.http://www.dispatch.com/live/content/business/stories/2008/11/01/FRENCH_MAC.ART_ART_11-01-08_C12_9HBOM3I.html?sid=101