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McDonald’s same-store sales rise 3.1% in May

Slow growth misses Wall Street expectations

McDonald’s May same-store sales came in at the lowest level since February 2010, falling short of Wall Street estimates and prompting some securities analysts to suggest that the company was feeling pressure from a weak economy.

The Oak Brook, Ill.-based burger giant said Wednesday that global same-store sales rose 3.1 percent in May, comprising increases of 2.4 percent in the United States, 2.3 percent in Europe and 4.3 percent in the Asia/Pacific, Middle East and Africa, or APMEA, division.

Andy Barish, securities analyst at Jefferies & Company, wrote that same-store sales in the United States and Europe were “a little light,” likely from negative impacts of higher gasoline prices in the former and weaker-than-expected results in Germany for the latter.

McDonald’s results fell short of Wall Street estimates, Barish wrote, which were 3.6 percent for global same-store sales, and 2.9 percent and 3.8 percent for the United States and Europe, respectively. He said APMEA same-store sales beat analysts’ 4-percent projections, however.

McDonald’s said in a statement that several initiatives increased sales around the world. The company credited the national launch of Frozen Strawberry Lemonade and the popularity of Fruit & Maple Oatmeal for higher comparable sales in the United States, and said strong performance in France, the United Kingdom and Russia partially offset soft sales in Germany.

Unique promotions, value and convenience powered strong results in China that drove much of APMEA’s sales, the company added.

Barish noted that the brand could improve upon the 2.4-percent lift in the United States tallied in May, but wrote that there would be little more upside than that.

“We think McDonald’s continues to have solid traffic drivers that can drive 3 percent same-store sales for the remainder of 2011, with relaunches and line extensions and its successful history of advertising multiple sales layers,” Barish said. “That said … the company does not appear to have as much significant product news for 2011 in the U.S. versus prior years, and we believe the company will be judicious with menu pricing and focus on traffic gains.”

David Tarantino of Robert W. Baird & Co., however, wrote that his firm still rated McDonald’s stock as “outperform” compared with the rest of the industry. He wrote that the company’s May comparable sales were “solid” and at a level needed to reach Baird’s full-year estimate.

“U.S. comps were slightly above our 2-percent estimate,” Tarantino wrote, adding that the results reflected menu initiatives and the 1-percent menu price increase taken in March.

McDonald’s said a calendar shift negatively affected results between 0.5 percent and 1.5 percent in different markets in May.

Separately, McDonald’s disclosed that favorable foreign-currency translation would benefit second-quarter results by 9 cents to 10 cents per share. The company will report second quarter earnings July 22.

McDonald’s operates or franchises more than 32,800 quick-service restaurants in 117 countries.

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

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