Wednesday, foodservice retailer McDonald's Corp. (MCD) said it posted a profit in its second quarter compared to a loss last year, when it recorded a charge of about $1.6 billion related to the sale of its certain Latin American and Caribbean businesses. Quarterly results were driven by global comparable sales growth of 6.1%, helped by its strong overseas sales.
The Oak Brook, Illinois-based company reported second-quarter net profit of $1.19 billion or $1.04 per share, compared to a net loss of $711.7 million or $0.60 per share in the same quarter last year. On average, 15 analysts polled by First Call/Thomson Financial expected earnings of $0.86 per share.
The latest quarter's results included a gain of 10 cents per share from the sale of its interest in Pret A Manger. Meanwhile, the company's year-ago results were weighed down by a $1.6 billion charge related to the sale of its Latin America and Caribbean businesses.
Excluding items, the company reported a net income of $869.9 million or $0.71 per share for the second quarter of 2007.
Revenues for the latest quarter rose 4% to $6.08 billion from $5.84 billion in the comparable quarter a year-ago. Twelve Wall Street analysts had consensus revenue estimate of $5.92 billion.
U.S., comparable sales were up 3.4% and operating income increased 6%. The region benefited from the company's four key growth strategies of chicken, breakfast, beverages and convenience combined with the nationwide launch of the Southern Style Chicken Biscuit and Sandwich and locally relevant beverage promotions.
In Europe, comparable sales increased 7.4% and operating income grew 29%, helped by unique marketing and signature menu options. Results were also driven by three-tier menu offerings, innovative new products and restaurant reimaging.
Asia/Pacific, Middle East and Africa delivered strong results, led by Australia and China along with broad-based strength throughout the segment. Second quarter comparable sales advanced 8.8%, driving operating income up 37%.
For the first-half, McDonald's earned $2.14 billion or $1.85 per share, compared to $50.7 million or $0.04 per share in the first-half of 2007. Total revenues increased 5% to $11.7 billion from $11.1 billion in the same period last year.
Like its peers, McDonald's is also facing with high ingredients costs and labor costs apart from the impact of $4-a-gallon gasoline prices. To offset the impact of rising costs, McDonald's has increased prices in the U.S., China and other markets this year. Last month it raised prices by 2.7% in China.
Meanwhile, due to a weak U.S. economy and rising fuel costs, consumers have cut back their spending, but McDonald's lower pricing and expanded menu helped weather the crisis. Strong international base also insulated the company from the impact of slowing U.S. economy. The company is expanding in overseas markets like Australia, China and Japan and getting the currency benefits of the weak U.S. dollar.
The world's largest restaurant chain has been benefiting from new menu items, extended hours and sales of discounted burgers and breakfast foods to cash-strapped consumers, who were feeling the pinch of higher fuel costs. McDonald's unveiled new chicken sandwiches and biscuits in April in the U.S. to boost sales. The company has begun selling strong coffee to capture market from Starbucks Corp. (SBUX). The company is installing counters to sell cappuccino and lattes through 2009.
Among McDonald's competitors, Yum! Brands Inc. (YUM) reported net income for the second quarter of $224 million or $0.45 per share, compared to $214 million or $0.39 per share for the year-ago quarter.
McDonald's stock is down 46 cents and currently trading at $59.66. In the past 52-weeks, the stock has been trading between $46.64 and $63.69.
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