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McDonald’s Profit Gains 15% as McCafe Beverages Boost Sales

James Skinner
Chief Executive Officer James Skinner began selling McCafe coffee in the U.S. in May 2009 to lure customers during non-peak dining hours and has since added cold drinks including smoothies. Photographer: Tim Boyle/Bloomberg

July 22 (Bloomberg) -- McDonald’s Corp., the world’s largest restaurant chain, said second-quarter profit rose 15 percent, topping analysts’ estimates, as more consumers dined out and McCafe beverages boosted sales.

Net income climbed to $1.41 billion, or $1.35 a share, from $1.23 billion, or $1.13, a year earlier, the Oak Brook, Illinois-based company said today in a statement. The average estimate of 22 analysts surveyed by Bloomberg was $1.28 a share.

Chief Executive Officer James Skinner began selling McCafe coffee in the U.S. in May 2009 to lure customers during non-peak dining hours and has since added cold drinks such as smoothies. Second-quarter McCafe sales in the U.S. rose 29 percent from a year earlier, the company said today on a conference call.

“With the heat wave, a lot of people are going in and getting frozen drinks,” Steve West, an analyst at Stifel Nicolaus & Co. in St. Louis, said today in an interview. “McCafe is doing very well.” West recommends buying the stock.

McDonald’s rose $2.02, or 2.3 percent, to $88.56 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has gained 15 percent this year.

The chain’s sales at stores open more than 13 months advanced 5.6 percent globally during the quarter. Analysts had predicted a gain of 4.1 percent. Comparable, or same-store sales, are an indicator of growth because the numbers include only older restaurants.

Same-Store Sales

In June, comparable store sales rose 7.7 percent worldwide, the largest monthly increase since November 2008. In the U.S., same-store sales climbed 6.9 percent in June, the biggest gain since February 2008.

“The results were outstanding -- June obviously went extremely well for them around the world,” Mark Kalinowski, an analyst at Janney Montgomery Scott LLC in New York, said in an interview. “They continue to take market share.” He advises buying the shares.

Second-quarter revenue climbed 16 percent to $6.91 billion. The average estimate of 19 analysts was $6.65 billion.

McDonald’s repeated a forecast that 2011 food inflation would be as much as 4.5 percent for the U.S. and Europe. Yum! Brands Inc., owner of the Taco Bell and Pizza Hut chains, said earlier this month it expects U.S. food costs to rise 7 percent this year.

The profit margin at McDonald’s company-operated restaurants narrowed to 19 percent in the second quarter from 19.9 percent a year earlier.

(McDonald’s held a conference call at 10 a.m. New York time. To listen, visit MCD US <Equity> EVT <GO>.)

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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