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McD posts positive July sales trends

Beverages, menu price increases help U.S. book 4.4% same-store sales increase

McDonald’s Corp. said Monday its 5.1-percent increase in global same-store sales in July was driven by beverages, especially new additions like the Mango Pineapple Real Fruit Smoothie, and menu items like premium chicken sandwiches.

For the month, same-store sales rose 4.4 percent in the United States, 5.3 percent in Europe, and 4 percent in the Asia-Pacific, Middle East and Africa region, or APMEA.

The company’s U.S. division was up against a difficult comparison in July, as the smoothie line was first introduced a year earlier, driving same-store sales in July 2010 up 5.7 percent.

John Glass, a securities analyst for Morgan Stanley who covers Oak Brook, Ill.-based McDonald’s, agreed that strong sales from McCafe beverages helped drive sales, but also noted that the 1-percent price increase McDonald’s took in March, and the 1.4-percent increase taken in May, played a part.

“Global same-store sales of 5.1 percent beat our estimate of 4.6 percent, but the three major reported segments were just in line with expectations,” Glass wrote in a research note. “The U.S. at 4.4 percent — about half was pricing — continues to benefit from beverages among other items and remains strong on a two-year basis.”

Two other analysts, Sara Senatore of Bernstein Research and Andy Barish of Jefferies & Company, both said McDonald’s same-store sales result in the United States beat their 4.1-percent estimate for the month.

Barish wrote that McDonald’s also benefited from strong sales of breakfast and Chicken McNuggets during the quarter. He predicted that McDonald’s third-quarter U.S. same-store sales will increase 5 percent.

“We think McDonald’s continues to have solid traffic drivers that can drive solid same-store sales for the remainder of 2011,” he said in a report, “with relaunches and line extensions and its successful history of advertising multiple sales layers.”

McDonald’s credited strong performance in the United Kingdom, Russia and Germany for partly making up weak sales in France, where an E. Coli outbreak related to beef did not implicate McDonald’s but nonetheless drove sales down for the month. The company said soft results in Japan offset gains in other markets in the APMEA division.

McDonald’s share price opened at $83.63 in morning trading, down 1.7 percent from its Friday close and 6.6 percent from its 52-week high of $89.57. By contrast, the Dow Jones Industrial Average had fallen as much as 3.15 percent in Monday trading, reflecting investor worries about the U.S. economy following the country’s credit rating downgrade from Standard & Poor’s.
At close Monday, McDonald’s stock price finished at $82.11, down 3.5 percent. The Dow fell more than 600 points, or 5.5 percent, to close at 10,809.85.

Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,000 restaurants worldwide, including more than 14,000 locations in the United States.

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN

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