McDonald’s beefs up profits by 53%

MCDONALD’S, the world’s largest restaurant chain, said fourth-quarter profit rose 53% on higher-priced items in the US and improved European sales.

Net income climbed to $608.5 million (€495.7m), or 48 cents a share, from $397.9m (€323.7m), or 31c, a year earlier. Sales increased 4.5% to $5.23 billion (€4.25bn), the company said yesterday.

McDonald’s said it plans to buy back $1bn (€810m) in stock this quarter.

Full-year capital spending will total $1.8bn (€1.4bn) and include the opening of 800 new restaurants, McDonald’s said. The company affirmed its goal of increasing annual sales by 3%-5% and operating profit by 6%-7%.

Global comparable-store sales rose 4.2% last quarter, gaining 4.1% in the US and 5.8% in the Asia/Pacific, Middle East and Africa.

Growth has slowed from a year earlier, when global same-store sales climbed 9.5%.

In the US, extended hours and wider availability of credit and debit card payment options helped sales, chief executive officer Jim Skinner said.

In June, McDonald’s increased to 4,000 from 2,500 the number of restaurants open 24 hours a day.

Fourth-quarter operating margin for company-owned stores was unchanged at 15.3%, McDonald’s said.

The US margin widened to 19.1% from 19% after the gain in same-store sales outweighed higher costs for commodities, labour and rent.

Declining same-store sales and rising labour expenses in Britain caused the European margin to narrow to 15.7% from 15.8%. Beef costs also increased.

But a discount ‘eurosaver’ menu and healthier offerings including salads have helped sales in Europe.

Since taking over in November 2004, Mr Skinner has continued his predecessors’ strategy of boosting revenue with more expensive items appealing to health-conscious consumers, including premium chicken sandwiches and fruit and walnut salads.

Television and radio advertising spurred sales of ‘McGriddle’ sandwiches.

For the year, net income increased 14% to $2.6bn (€2.1bn) on a 7.9% gain in sales to $15.4bn (€12.5bn).