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McDonald’s: Strong sales continue in April

OAK BROOK, Ill. McDonald’s Corp. reported on Thursday first-quarter earnings growth stemming from same-store sales growth in all areas of the world, which it said was strong in March and continuing through April.

McDonald’s net income for the quarter totaled $1.09 billion, and 11-percent increase over the first quarter of 2009. Earnings per share rose 13 cents from the year-earlier quarter to $1, which included a 5-cent benefit from currency translation and an after-tax charge of 3 cents per share related to restaurant closings in Japan.

Total revenue was $5.61 billion for the quarter, reflecting a 10-percent increase over the $5.08 billion in revenue in the first quarter of 2009, or a 4-percent increase in constant currencies.

Global same-store sales rose 4.2 percent in the first quarter, comprising gains of 1.5 percent in the United States, 5.2 percent in Europe and 5.7 percent in the Asia/Pacific, Middle East and Africa division.

McDonald’s was optimistic that April same-store sales figures would be just as strong as those in the first quarter.

“March was a real good month,” Peter Bensen, McDonald’s chief financial officer, told investors during the company’s quarterly conference call. “We saw sales and guest count growth across all dayparts, and that momentum is continuing into April. … We expect April to be at least as strong as the quarter on a global basis, so global same-store sales won’t be lower than 4.2 percent.”

McDonald’s said its first-quarter operating income rose 12 percent in the U.S. division, led by value offerings like the new Breakfast Dollar Menu, which included the premium roast coffee of the McCafe line of beverages. Drinks will play a role in McDonald’s ongoing marketing strategy, as certain markets are offering any-size soft drinks and sweet tea for $1 and the chain hopes to have McCafe Frappes and Real Fruit Smoothies systemwide later this year.

Don Thompson, president and chief operating officer, said the Frappe item was in about 90 percent of domestic restaurants and that Real Fruit Smoothies were in about 2,000 restaurants, and both items were performing well.

He also told investors that promoting everyday affordability has driven traffic, even in the face of high unemployment.

“One thing that’s really great this year is that an even larger percentage of sales growth is coming from guest count growth,” Thompson said. “When we implement breakfast value pieces, like the Breakfast Dollar Menu, the guest counts we’re driving are tremendous and far exceed break-even levels.”

A key differentiator for McDonald’s is to promote constant value through permanent lineups like the Dollar Menu and Breakfast Dollar Menu, so product news can be centered on higher-perceived-value items and not individual discounts, he added.

“We have consistent value across the year, which allows us then to come in with promotional activities and talk about Frappes, Smoothies and Angus burgers,” Thompson said. “We’re not jumping in and out of discount activities.”

The company added that strong sales in the United Kingdom, France and Russia increased operating income 23 percent in Europe, or 14 percent in constant currencies, while robust performance in Australia and China drove a 27-percent jump in operating income in APMEA, or a 9-percent increase in constant currencies.

Contact Mark Brandau at [email protected].

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