McDonald’s Profit Falls; U.S. Sales Climb
New salads helped McDonald’s Corp. serve up significantly stronger U.S. sales in the second quarter, the company said Tuesday, but profit fell 5% on spotty results from its restaurants in Europe and Asia.
Despite the biggest quarterly jump in sales since 1998 from established U.S. McDonald’s-brand restaurants, disappointing results overseas kept talk of a long-sought turnaround on hold.
Net income for the April-through-June period was $470.9 million, or 37 cents a share, down from $497.5 million, or 39 cents, a year earlier. That met analysts’ average estimate, Thomson First Call said.
Revenue was $8.08 billion, up 8% from $7.46 billion a year earlier -- an increase explained partly by the weak U.S. dollar.
New Chief Executive Jim Cantalupo stuck to his earlier assessment that the fast-food giant’s restructuring would not put the company fully back on the path to consistent, solid growth until 2005.
“While we are encouraged, we are keenly aware that this is just the starting point,” Cantalupo told analysts.
Lower sales in Germany and Britain, and an especially weak quarter in Japan and elsewhere in Asia because of the outbreak of severe acute respiratory syndrome, combined with higher costs to push results below those of a year ago, keeping McDonald’s mired in its protracted slump. The Oak Brook, Ill.-based chain has failed to exceed the previous year’s earnings in all but two quarters since 2000.
But the company said the positive reception for its entree-sized salads and McGriddle breakfast sandwiches helped U.S. same-store sales rise 4.9% from the previous year, the highest increase since its Teeny Beanie Babies promotion five years ago.
Investors sent McDonald’s shares up 89 cents, or 4.2%, to $22.15 on the news on the New York Stock Exchange.
Perhaps the most notable development of the quarter was the success of the new premium salads, which followed a similar move by rival Wendy’s International Inc. last year. McDonald’s said the $3.95 salads helped increase the amount of the average check even as the company continued its price-discounting “Dollar Menu” promotion.
Under pressure to make its food healthier, McDonald’s appears to be one of the biggest beneficiaries of what NPD Group calls a new trend in the fast-food business: booming salad sales. The New York-based marketing research firm said Tuesday that orders for main-dish salads at fast-food restaurants grew 12% in the 12 months ended in May.
