Shares of the world's largest hamburger chain were down about 4 cents in early trading on Monday, even as the company reported a fourth-quarter profit in line with expectations.
The company said its grocery bill -- what it pays for some 10 different commodities needed for food preparation -- is expected to rise this year 2 percent to 2.5 percent in the United States and 3.5 percent to 4.5 percent in Europe -- its two largest markets.
Executives last year signaled that McDonald's could raise menu prices to offset higher food costs, and several analysts expect those to hit in 2011.
My guess is that they do (raise prices) by a little bit, said Janney Capital Markets analyst Mark Kalinowski.
McDonald's has used spiffed-up restaurants, value menus and new food items to steal U.S. market share from rivals like No. 2 hamburger chain Burger King, which is now private after its sale to 3G Capital.
The chain, also known as the Golden Arches, had a banner year in 2010, with new menu items including espresso drinks and specialty beverages -- frappes and smoothies -- that boosted sales. However, last year's strong results have raised the bar for 2011 and some analysts worry that earnings-per-share growth could slow.
McDonald's said global sales at restaurants open at least 13 months rose 3.7 percent overall in December. They gained 2.6 percent in the United States, slid 0.5 percent in Europe and rose 8.9 percent for Asia-Pacific, Middle East and Africa.
Wall Street had expected December same-restaurant sales to be 3.9 percent higher in the United States, up 3.4 percent in Europe and gain 5.7 percent in APMEA, according to Kalinowski.
In November, McDonald's same-restaurant sales rose less than expected in the United States and Japan.
The U.S. market accounts for about 35 percent of McDonald's revenue.
For January, the company expects global same-restaurant sales to increase 4 percent to 5 percent.
Net income in the fourth quarter rose to $1.24 billion, or $1.16 a share, compared with $1.22 billion, or $1.11 a share, in the year-earlier quarter. The profit matched what analysts polled Thomson Reuters I/B/E/S had expected.
Total revenue, including sales from company-owned restaurants plus royalties from franchisees and other fees, rose 4 percent to $6.21 billion, above the $6.20 billion analysts had expected.
McDonald's shares slipped about 4 cents to $74.96 in early New York Stock Exchange trading.
(Additional reporting by Ben Klayman; Editing by Derek Caney and Maureen Bavdek)