(By Mayur Pahilajani - iStockAnalyst Writer)
Oak Brook, IL - More number of cash-strapped people opted to dine at fast-food restaurant chain McDonald's Corp. (NYSE: MCD) in January, pushing up the company's global same-store sales by 7.1 percent.
The world's largest restaurant company has consistently gained its consumer base as more number of companies across all the sectors layoff workers amid already weakened consumer spending due to challenging economic conditions.
Same-store sales are the key indicator of a fast-food restaurant's performance in the year-over-year period. The sales measure growth at existing stores opened for at least one year rather than newly opened outlets.
"I was thinking January was going to be a pretty soft month. But again, these guys continued to thrive in a down economy," Morningstar restaurant analyst R.J. Hottovy was quoted as saying by Reuters as the results beat his expectations. "They continued to execute both here and abroad."
The comparable sales surged by 5.4 percent in the United States last month as 598,000 people lost their jobs in January, the highest level job losses since December 1974. The jobs data released by the Labor Department showed the unemployment rate hitting 7.6 percent in the same period.
In the domestic market, the consumers sought out the low-cost offerings of the restaurant chain, which includes its value menu and breakfast menu, as other restaurants continued to struggle with slumping demand.
Sales at U.S. restaurants open at least 13 months climbed by 7.1 percent as the U.K., France and Russia proved especially strong markets; followed by a 10.2 percent growth recorded by the company in the Asia/Pacific, Middle East and Africa markets.
Locally tailored chicken and beef choices, convenient operating hours and successful Chinese New Year promotions contributed to January’s performance in the regions, the company said.
"2009 is off to a good start for McDonald’s as our Plan to Win is working in every area of the world," said Chief Executive Officer Jim Skinner. "McDonald’s continues to appeal to customers as we offer high quality, affordable meal options and unparalleled convenience."
The market analysts on Wall Street had expected the firm to post global same-store sales rise of 4.1 percent with comparable-store sales in the U.S. at 4.3 percent and around 5 percent in European markets.
At the global level, system wide sales for McDonald's restaurants increased by 2.6 percent for the last month. Without the impact from a strengthening U.S. dollar, the company's January's sales growth would have been 9.1 percent.
Currency exchange has affected the profits of several companies operating at global level. But the market analysts said that the effect may not last long as the on-going correction will reposition dollar's value against major currencies.
Shares of the company, which has nearly 32,000 local restaurants in more than 100 countries, were moving higher by 57 cents or 0.97 percent to $59.03 in New York’s late morning session on Monday.
McDonald's, part of the Dow Jones Industrial Average, has hit a high of $67.00 and a low of $45.79 in the last 52-week period on the New York Stock Exchange. The stock has dropped only by 6 percent so far this year.
With the rising stock price, Zacks Research reported before the bell today that eight brokerage companies will maintain a downbeat "hold" rating on the security. But there is a lot of opportunity for possible upgrades for the company.
