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McDonald’s profit up 2% in 4Q

New products help offset impact of severe winter weather

McDonald’s Corp. overcame severe weather in the United States and Europe to close out the fourth quarter and the fiscal year with gains in traffic, sales and earnings, the company said Monday.

For the Dec. 31-ended fourth quarter, McDonald’s net income rose 2.1 percent to $1.24 billion, or $1.16 per share, compared with $1.22 billion, or $1.11 per share, a year earlier. Revenue increased 4 percent to $6.21 billion in the fourth quarter from $5.97 billion a year earlier.

Global same-store sales rose 5 percent in the quarter, reflecting increases of 4.4 percent in the United States, 3.4 percent in Europe and 5.5 percent in the Asia/Pacific, Middle East and Africa division.

McDonald’s said new products and promotions in the fourth quarter helped offset slow sales in December brought on by inclement weather in much of the country. The company said it benefited from the reprise of several popular initiatives, including the Monopoly promotion in October and the first nationwide rollout of the McRib since 1994. In December, the chain also added a caramel mocha to its McCafe lineup, capping off a successful year for the beverage line, which also included frappes and smoothies that executives credited for sparking incremental traffic and sales.

Much like the United States, several parts of Europe experienced severe winter weather in December, but McDonald’s said its restaurants there still saw increased guest counts and sales. Germany and the United Kingdom were most affected by blizzards, but restaurants in France and Russia picked up the slack, the company said. The region has focused for much of the past year on remodeling restaurants and expanding drive-thru service.

Japan, Australia and China led the way in the APMEA region in the fourth quarter and through much of the year, McDonald’s said. The company noted that new value-focused menu items and limited-time offers drove much of the 18-percent gain in operating income in that segment in the fourth quarter.

For the full year, McDonald’s reported net income of $4.95 billion, or $4.58 per share, up 9 percent from profit of $4.55 billion, or $4.11 per share, in fiscal 2009. Revenue rose 6 percent to $24.07 billion in 2010, compared with $22.74 billion a year earlier.

McDonald’s reported a global same-store sales increase of 5 percent for the full year, which reflected gains in all three operating divisions.

“Our results for 2010 reflect the power of our customer-centered initiatives, the fundamentals of our business model, and the alignment between McDonald’s franchisees, suppliers and employees,” said chief executive Jim Skinner. “I am confident that these strengths will endure and continue to deliver for our system and our shareholders over the long term. We are off to a good start in 2011. Our momentum is continuing in January with global comparable sales expected to increase 4 percent to 5 percent.”

Skinner added that McDonald’s would take much of its cash flow and deploy it in 2011 for capital expenditures related to upgrading and reimaging restaurants around the world, a key long-term initiative for the brand.

“Our recurring cash flow and strong balance sheet allow us to invest appropriately in our business and return significant amounts of cash to our shareholders,” he said. “In 2011, we plan to invest about $2.5 billion of capital — roughly half dedicated to opening approximately 1,100 new McDonald’s restaurants and the other half allocated to investing in our existing locations, including reimaging.”

Oak Brook, Ill.-based McDonald’s operates and franchises more than 14,000 restaurants in the United States and more than 32,000 locations worldwide.

Contact Mark Brandau at [email protected].

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