McDonald’s July sales top estimates as new items lure diners

August 8, 2013 05:25 AM

McDonald’s Corp., the world’s largest restaurant chain, said sales at stores open at least 13 months rose 0.7% last month, topping analysts’ estimates, as new wraps and breakfast food attracted U.S. diners.

Analysts projected a 0.4% gain, the average of 15 estimates compiled by Consensus Metrix. Same-store sales in the U.S. rose 1.6%, the Oak Brook, Illinois-based company said today in a statement. Analysts projected a 0.3% increase.

The 34,700-restaurant chain has introduced new menu items in the U.S. this year, including chicken McWraps and egg-white breakfast sandwiches, to compete with Burger King Worldwide Inc. and Wendy’s Co., which are rolling out new food. McDonald’s also is advertising its Dollar Menu in the U.S. and combo meals in France and Germany, its largest European markets, to attract cash-strapped consumers.

“Their breakfast business has been strong,” and the egg- white sandwich probably helped boost July sales, Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. “As the economy improves and you get job growth, more and more people are now driving to work and so they tend to go through the drive-through.”

McDonald’s fell 0.7% to $97.66 at 9:44 a.m. in New York. The shares climbed 11% this year through yesterday, while the Standard & Poor’s 500 Restaurants Index gained 18%.

U.S. Economy

The U.S. economy grew more than projected in the second quarter, showing the country may be overcoming higher taxes and cuts in government spending. Consumer spending also is increasing, which may be helping McDonald’s sell more burgers. U.S. spending rose 1.8% during the second quarter, topping analysts’ estimates.

Same-store sales fell 1.9% in both Europe and the company’s Asia Pacific, the Middle East and Africa region. Analysts projected a 0.3% increase and 0.3% drop, respectively, according to Consensus Metrix, a researcher owned by Kaul Advisory Group in Wayne, New Jersey.

Comparable-store sales are considered an indicator of a company’s growth because they only include older, established locations.

July store sales fell in Germany and France, where McDonald’s has about 2,700 stores.

‘Tough Economies’

The chain is “going to face some tough economies around the world,” Chief Executive Officer Don Thompson said on July 22 during a conference call. “Based on our recent sales trends, our results for the rest of the year are expected to remain challenged.”

McDonald’s, which gets about 40% of its revenue from Europe, has advertised 4.50 euro baguette sandwich and drink combos in France to attract diners. In Germany, the chain is promoting new snack salads and wraps with arugula and couscous, along with value meals.

About 19% of McDonald’s locations worldwide are owned by the company.

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