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McDonald’s Profit Climbs 4.8% as New Items Drive Sales

McDonald’s Profit Climbs 4.8% as New Items Drive U.S. Sales
McDonald's Corp. chicken selects, a McCafe coffee and strawberry banana fruit smoothie are arranged for a photograph in San Francisco. Photographer: David Paul Morris/Bloomberg

April 20 (Bloomberg) -- McDonald’s Corp., the world’s largest restaurant chain, reported a 4.8 percent gain in first-quarter profit as new menu items such as Chicken McBites attracted U.S. consumers.

Net income advanced to $1.27 billion, or $1.23 a share, from $1.21 billion, or $1.15, a year earlier, the Oak Brook, Illinois-based company said today in a statement. Analysts projected $1.23, the average of 26 estimates compiled by Bloomberg.

McDonald’s, which last month named Don Thompson to the CEO position starting in July, has sought to draw Americans with new and limited-time items, such as McCafe drinks and white-meat Chicken McBites. Sales at U.S. stores open at least 13 months rose 8.9 percent in the quarter. Analysts projected 8.3 percent, the average of 22 estimates compiled by Consensus Metrix.

“McDonald’s is taking market share just because their restaurants are more up-to-date, more modern and cleaner” than competitors, Peter Saleh, an analyst at Telsey Advisory Group in New York, said in an interview. McCafe beverages, which are a “growing category,” are also helping boost sales, he said.

The shares climbed 0.7 percent to $95.94 at the close in New York. McDonald’s has declined 4.4 percent this year.

The Big Mac seller, which plans to open 1,300 new stores this year, compared with 1,150 last year, also is updating stores to help lure customers. The company will spend about $1.45 billion to remodel about 2,400 stores this year, McDonald’s said in filing today.

Global Sales

McDonald’s comparable-store sales increased 7.3 percent globally in the first quarter, compared with the 6.7 percent average estimate of analysts surveyed by Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group. Comparable-store sales advanced 5.5 percent in McDonald’s Asia, Pacific, Middle East and Africa region, trailing estimates for a gain of 5.9 percent.

April same-store sales will rise about 4 percent globally, the company said in the statement. Comparable-store sales are considered an indicator of a retailer’s growth because they include only older locations.

“Ongoing economic challenges and severe weather in February negatively impacted” Europe, McDonald’s said in the statement. Same-store sales in that region rose 5 percent in the quarter, compared with an estimate for growth of 4.2 percent. McDonald’s gets about 40 percent of its revenue from stores in Europe.

McDonald’s will continue to focus on selling nutritional food, core menu items and premium products, Thompson said during a conference call today with analysts. At McDonald’s, “a change in leadership doesn’t mean a change in strategy,” he said.

Revenue increased 7.1 percent to $6.55 billion. Analysts estimated $6.54 billion, on average.

McDonald’s has more than 33,500 locations worldwide, of which about 80 percent are franchised.

(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: Kevin Orland at korland@bloomberg.net

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