McDonald's sales bounce back on value deals

AP News
Posted: Sep 11, 2012 6:11 PM
McDonald's sales bounce back on value deals

NEW YORK (AP) — McDonald's said a key sales figure climbed 3.7 percent in August, as the fast-food chain emphasized the value of its menu offerings amid the challenging global economy.

The world's biggest hamburger chain said Tuesday that its breakfast menu and value items pushed up sales by 3 percent in the U.S. Last month, the figure had dipped 0.1 percent in the region after the company said its promotions failed to drive growth.

McDonald's has been intensifying its "messaging around value," noted Andy Barish, a Jefferies analyst. For example, he noted that the company ran promotions for its breakfast Dollar Menu in mid-August.

In Europe, which is McDonald's biggest market and accounts for 40 percent of its business, sales at restaurants open at least 13 months was up 3.1 percent on strength in the U.K., France and Russia. The Oak Brook, Ill.-based company said its sponsorship of the London Olympics helped lift results.

Another strong contributor was its Coke Glass promotion, in which customers got a free glass and wristband when they bought an extra value meal or premium salad.

The strongest performance in August came from the region encompassing Asia, the Middle East and Africa, with revenue at stores open at least 13 months up 5.7 percent.

McDonald's said the increase in the region was fueled by a shift in the timing of Ramadan, the monthlong observance during which Muslims fast during daylight hours. Ramadan ran from late July to mid-August this year. It had fallen entirely in August last year.

Strong results in Australia and China also helped.

The overall results for the month were offset by weakness in Japan, Germany and parts of southern Europe that have been hit by austerity measures.

In such hard-hit regions, McDonald's has been working to underscore the value of its meals to lure consumers to eat out more often. In the U.S., the company plans to continue mixing up its menu with new items. And in Asia, the company has said it will boost traffic by offering "convenience enhancements," such as delivery.

Sales at all the company's restaurants rose 1.2 percent for the month. McDonald's, which has more than 33,500 locations around the world, is often seen as a bellwether for the industry.

The increase in August follows a disappointing showing in July, when the figure came in flat. That was the worst showing in more than nine years; the last time the figure dipped for McDonald's was in April 2003.

After years of outperforming its rivals, analysts say McDonald's could be heading into a period of slower growth. The company is also facing increasing competition, with Burger King Worldwide Inc. and The Wendy's Co. working to revive their brands.

Revenue in restaurants open at least 13 months is a key measure of a restaurant chain's performance because it strips out the impact of recently opened or closed stores. The figure is a snapshot of money spent on food at both company-owned and franchised restaurants. They do not reflect corporate revenue.

Shares of McDonald's Corp. fell 10 cents to close at $91.20 Tuesday.