McDonald's Profit Rises 12%, Spurred by Frozen Drinks

McDonald’s Corp., the world’s largest restaurant chain, posted a 12 percent gain in second- quarter profit after attracting more customers with its frappes and smoothies.

Net income rose to $1.23 billion, or $1.13 a share, Oak Brook, Illinois-based McDonald’s said today in a statement. That compared with the $1.12 average of estimates compiled by Bloomberg.

Sales increased 5.3 percent to $5.95 billion, bolstered by sales of frozen drinks in the three months ended in June, the hottest on record, according to U.S. government data. The restaurant chain, led by Chief Executive Officer Jim Skinner, has added smoothies and other products to lure consumers into its locations outside regular meal times.

“There’s not a ton of competition out there for McDonald’s,” Janney Montgomery Scott LLC analyst Mark Kalinowski said in a telephone interview before the results came out. “None of the other burger chains have the beverage platform that McDonald’s does.”

McDonald’s may introduce new Angus snack wraps, hot oatmeal and frozen lemonade in the next year, the New York-based analyst said. He recommends that investors buy the shares.

McDonald’s dropped 39 cents to $71.01 at 9:37 a.m. in New York Stock Exchange composite trading. Before today, the shares had climbed 14 percent this year, compared with a 1.9 percent decline in the Standard & Poor’s 500 Index.

In Line

“The report itself is in line with expectations,” Matt DiFrisco, an analyst at Oppenheimer & Co. in New York, said in an interview. “But the stock was hitting up against a 52-week high. I don’t see anything in this release that raises its outlook dramatically.”

The chain’s sales at stores open more than 13 months increased 4.8 percent globally. They rose 3.7 percent in the U.S., 5.2 percent in Europe and 4.6 percent in Asia, the Middle East and Africa.

The company said foreign currency fluctuations didn’t have a net impact on profit in the quarter. The weakening euro cut 5 percentage points from operating income in McDonald’s European business. Strengthening currencies in the chain’s Asia, Middle East, and Africa markets countered that, boosting McDonald’s earnings 10 percentage points.

To contact the reporter on this story: Burt Helm in New York at bhelm3@bloomberg.net.

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