McDonald's 'Dollar Menu' sparks November sales rebound

Tue Dec 11, 2012 12:21am IST

A man holds a tray of food at a McDonald's restaurant in Times Square, New York in this May 31, 2012 file photo. REUTERS/Mike Segar/Files

A man holds a tray of food at a McDonald's restaurant in Times Square, New York in this May 31, 2012 file photo.

Credit: Reuters/Mike Segar/Files

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REUTERS - McDonald's Corp's (MCD.N) sales at established restaurants rose more than expected in November as a renewed emphasis on low-priced menu options, such as $1 Sausage McMuffins and coffee, helped the company bounce back from a rare decline in October, it said on Monday.

Sales at restaurants open at least 13 months were up 2.4 percent in November, easily topping the tepid 0.17 percent increase expected by analysts polled by Consensus Metrix.

Still, analysts said it was too early to say that the world's biggest restaurant chain, known for its french fries and Big Macs, had regained its strong lead over rival fast-food chains.

"One month does not a trend make ... but it's a nice sign to see them rebound after a horrible October," ITG Investment Research analyst Steve West said.

In October, McDonald's posted its first monthly drop in the closely-watched performance measure in nine years.

Analysts expect volatile industry sales in the coming quarters as countries around the world grapple with economic woes and high unemployment.

Profits could get squeezed as diners shop around for deals and restaurants respond by keeping prices down.

"We are concerned about the margin outlook in this more promotional environment," said Lazard Capital Markets analyst Matthew DiFrisco.

The company's business has softened in the United States, McDonald's second-largest market, as revived rivals like Wendy's Co (WEN.O) and Burger King Worldwide Inc (BKW.N) crank out new premium and value products.

One week after McDonald's announced disappointing October sales, it replaced Jan Fields, the president of its U.S. business. Jeff Stratton, who had been the company's global restaurant officer, took over on December 1.

U.S. sales at established restaurants rose 2.5 percent in November, while analysts had expected a small decline.

McDonald's "ramped up its value messaging, focusing heavily on the Dollar Menu to help drive traffic," Jefferies & Co restaurant analyst Andy Barish said in a research note.

The company has been promoting both the Dollar Menu and its Extra Value Menu, which includes offerings like 20 Chicken McNuggets for $4.99, to lure diners.

McDonald's attributed the results to the Dollar Menu, breakfast and its beverage menu. But it also said limited-time offerings like cheddar, bacon and onion burgers and chicken sandwiches had bolstered sales.

U.S. results in December should benefit from the return of the popular McRib sandwich, but analysts said McDonald's still needs to come up with more new food launches.

Same-restaurant sales rose 1.4 percent in Europe, McDonald's biggest market, compared with calls for a 0.1 percent increase. Results were stronger in the UK and Russia, which were boosted by limited-time promotions, while Germany continued to be a drag.

McDonald's put up flat results in France, its top European market, where diners are cutting back on meals away from home.

Asia/Pacific, Middle East and Africa turned in a 0.6 percent increase, compared with the average forecast of a 0.9 percent decline. Japan remained the weak link for the franchise in Asia and McDonald's has responded by introducing a menu with options costing 100, 250 and 500 yen.

McDonald's shares rose 1.35 percent to $89.67 in early afternoon trading on the New York Stock Exchange.

(Reporting by Lisa Baertlein in Los Angeles and Brad Dorfman in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn and Grant McCool)

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