World Business

McDonald's May sales up but sees euro drag on profit

(Agencies)
Updated: 2010-06-09 15:05

McCafe boost

While US growth fell short of analysts' view, it outpaced results from other fast-food chains and was powered by the expansion of McCafe drinks and the popularity of products associated with the launch of the movie "Shrek Forever After."

"McDonald's, of the top seven burger brands in the country, is the only one reporting meaningfully positive same-store sales," said Janney Montgomery Scott analyst Mark Kalinowski.

Last week, McDonald's recalled at least 13.4 million "Shrek"-themed drinking glasses in the United States and Canada due to the presence of the toxic metal cadmium in the designs. The company is now offering $3 refunds to customers who bought the recalled glasses.

Sales growth in Europe was driven by France, Germany, Britain and Russia. Europe contributed 41 percent of McDonald's overall revenue last year -- more than any other region -- and business there has benefited from longer operating hours and restaurant renovations.

Bane Knezevic, head of McDonald's Germany, told Reuters that consumer sentiment in Europe's economic powerhouse has picked up after a harsh winter and economic slump. But the German government's plans to cut spending and rein in deficits could dampen sentiment.

"It is still a bit early to say how consumers will react," Knezevic said. While he expects some negative effect in the months ahead, he said, "It won't be big."

Shares in McDonald's rose 0.6 percent to $67.17 in late morning trading. Burger King, which counts Germany as its largest international market, saw its shares fall 0.1 percent.

China shines

May same-store sales rose 3.8 percent in the Asia/Pacific, Middle East and Africa (APMEA) region due to strength in Australia and China, better than the 3.1 percent increase analysts had expected.

Related readings:  McDonald's recalls toxic Shrek glasses   McDonald's to invest 25% more capital in China  McDonald's hopes to get bigger bite of Asian markets

McDonald's had nearly 8,500 restaurants of its 32,500 global restaurants in that APMEA region, which contributed nearly 20 percent of its revenue in 2009. Australia, China and Japan accounted for more than 50 percent of APMEA's revenue.

The Golden Arches, as the company is known, plans to double its China network to more than 2,000 outlets by 2013.

Yum Brands Inc has more than 3,500 restaurants in China, a bigger presence than any other US operator. Shares in Yum were up 1.0 percent.

Year-to-date through Monday, McDonald's shares were up 7 percent, compared with a 3 percent fall in Burger King shares and a gain of almost 14 percent in Yum stock.