McDonald's Feb sales up in Europe

By @ibtimes on

Strength in Europe helped offset softer-than-expected February sales at McDonald's Corp's established U.S. restaurants, which are being pinched by unemployment and rising gasoline prices.

February sales at U.S. restaurants open at least 13 months were up 2.7 percent in the United States as McCafe beverage purchases again boosted results.

But Wall Street analysts on average were expecting a 3.6 percent increase in the United States, and McDonald's shares were down $1.10, or 1.4 percent, at $75.19 in morning trading.

It's a recovery, but it's a slower recovery than what was anticipated, said Oppenheimer analyst Matthew DiFrisco, who expected U.S. same-restaurant sales to be up 2.9 percent.

He said high unemployment and rising fuel prices were affecting sales in the United States and would remain a concern.

Peter Jankovskis, co-chief investment officer at OakBrook Investments, attributed the weak U.S. results to severe winter weather that forced multi-day business closures in the Midwest and said March sales should rebound as a result.

Gasoline prices in the United States started rising late in February. Because of that, Jankovskis said the results offered scant information regarding the impact of pricier gas on McDonald's sales.

Still, he predicted that full-service U.S. restaurants -- where meals are more expensive -- would be hit harder by higher prices at the pump.

It's more likely you'll see a negative impact on casual dining. You may see some people who were frequenting those restaurants visit McDonald's instead, Jankovskis said.

That trade-down should offset the loss of lower-income customers who may be most affected by high gas prices and as a result, stop patronizing restaurants, he said.

Sales in the United States account for about 35 percent of overall revenue.

Spiking prices for gasoline and groceries threaten to cut into global consumer spending. At the same time, restaurant operators are also grappling with higher costs for ingredients such as beef, cheese, bread and cooking oil.

In Europe, which contributes about 40 percent of revenue, McDonald's is more of a middle-class draw, DiFrisco said, making restaurant patrons there a bit less sensitive to rising gasoline costs than their U.S. counterparts.

Investors for months have worried that austerity measures would cut into spending in Europe, but same-restaurant sales there were up 5.1 percent, a second consecutive month of strong gains after a decline in December. Analysts, on average, were expecting a rise of 3.6 percent.

Same-restaurant sales rose 4 percent in McDonald's Asia/Pacific, Middle East and Africa (APMEA) unit, better than the 1.8 percent increase analysts' expected, with gains dampened slightly by currency conversions.

(Reporting by Phil Wahba and Lisa Baertlein in Los Angeles, editing by Dave Zimmerman and Maureen Bavdek)

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