McDonald's same-store sales rise 8.2 percent

[November 11, 2008]  NEW YORK (AP) -- Consumers worldwide who are watching their spending bought more burgers and chicken breakfast biscuits at McDonald's in October, leading to a big rise in sales at established locations for the fast-food leader.

McDonald's Corp. said Monday its global same-store sales jumped 8.2 percent during the month. That beat the company's own prediction for a rise similar to the one it recorded in its last quarter, when same-store sales, or sales at locations open at least a year, jumped 7.1 percent worldwide.

The results were a bright spot in what was a dismal month for most restaurant operators. Many sit-down chains have reported steep declines in same-store sales during October as consumers grew more anxious about the possibility of a prolonged recession.

But U.S. consumers kept spending at McDonald's, even as Congress passed a bill to bail out the economy and credit markets froze.

Same-store sales rose 5.3 percent in the United States, helped by new menu items, including the Southern Style Chicken sandwich, and continued demand for breakfast items. The company's popular Dollar Menu and its annual Monopoly promotion also drew in value-hungry consumers.

"McDonald's strong October sales show that we are delivering what customers count on from McDonald's -- choice, variety and high-quality food and beverages at affordable prices," Chief Executive Jim Skinner said in a statement.

Same-store sales rose 9.8 percent in Europe and grew 11.5 percent in the Asia-Pacific, Middle East and Africa region. Demand was particularly strong in Australia, the company said.

Same-store sales are a key indicator of restaurant performance since they measure growth at existing locations rather than newly opened ones.

The nation's No. 1 hamburger chain said total sales rose 5.4 percent during the month.

Wall Street analysts had been concerned that a stronger dollar in October might inhibit sales increases. Chains translate their sales overseas into dollars so for a company like McDonald's, which has a large overseas presence, shifts in the strength of the dollar can lead to skewed results.

But most analysts said the stronger dollar seemed to drag on sales only slightly.

Goldman Sachs analyst Steven Kron said in a note to investors that business momentum at the chain is "overpowering" any shift in the strength of the dollar.

Overall, Kron said the results "temper lingering concerns that a global economic slowdown will impact the company's results."

Morningstar analyst John Owens said the results show McDonald's is likely benefiting from diners who might ordinarily go to pricier sit-down restaurants but are gravitating to fast food to save money -- a phenomenon called "trading down."

"It definitely shows they are recession-resistant," Owens said.

But he cautioned that the company is not immune to the effects of a recession since some customers may start ordering more from the Dollar Menu or restrict their purchases of soft drinks or other items that pad the company's profit.

McDonald's is scheduled to release November same-store sales on Dec. 8.

Shares of McDonald's climbed $1.01 to close at $56.48 Monday.

[Associated Press; By LAUREN SHEPHERD]

AP Business Writer Betsy Vereckey contributed to this report.

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