McDonald’s Corp. reported a bigger-than-expected rise in worldwide October sales at established restaurants Tuesday as it continues to outperform competitors in an uncertain global economy.
McDonald’s said Tuesday sales at restaurants open at least 13 months rose 5.5 per cent globally.
Analysts were looking for a 4.5-per-cent gain, according to Thomson Reuters data, and McDonald’s had previously forecast an increase of 4 per cent to 5 per cent.
McDonald’s shares initially rose about 1 per cent Tuesday but were down 0.4 per cent at $94.26 by late morning. The shares are up 25 per cent from a year ago.
Europe is grappling with debt worries; stubbornly high unemployment is stifling economic recovery in the United States; and, China’s government is tapping on the brakes in an effort to cool inflation.
Still, McDonald’s for months has reported industry-leading results.
“It’s more about how well they are operating,” Bernstein Research analyst Sara Senatore said, noting that the company is outpacing rivals in Europe and the United States – its biggest markets.
McDonald’s has been increasing its lead over hamburger chains including Wendy’s Co. and Burger King Corp. by attracting a broader range of diners than fast food’s typical young adult males.
“The competition continues to be pretty weak,” said Edward Jones analyst Jack Russo.
McDonald’s has global reach and financial strength that is unmatched by many restaurant operators. As a result, its cost of goods is lower and it can spend more money on advertising and restaurant renovations.
Strong sales also have made it possible for the company to raise menu prices to offset higher food costs. Russo said those price increases bolstered October results.
Helped by the Monopoly game promotion, the company’s same-restaurant sales rose 5.2 per cent in the United States, beating analysts’ expectations of 4.1 per cent.
In Europe – McDonald’s top market for revenue – the company reported a 4.8-per-cent increase, better than the analysts’ call for a 3.4-per-cent rise. The company cited strength in France, Russia and the U.K.
Sales in Asia and the Pacific, the Middle East and Africa rose 6.1 per cent, beating analysts’ call for a 3.9-per-cent rise.
Oppenheimer analyst Brian Bittner said in a client note that U.S. momentum could accelerate in November, helped by the relaunch of the popular McRib sandwich late last month.
Diners around the world are looking for ways to save money on meals away from home and McDonald’s is responding in two ways: It is promoting its low-price dollar menu for people on tight budgets. At the same time, it is selling premium Angus beef hamburgers and a selection of high-margin drinks, including lattes and fruit smoothies, to appeal to diners trading down from full-service chains.
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