November 8, 2011 / 1:23 PM / 6 years ago

McDonald's key October sales top expectations

<p>Customer Steven Price sits at a table near a HDTV screen showing the new McDonald's Channel featuring a commerical about McCafe drinks at a McDonald's restaurant, part of the test market for the channel in Norwalk, California October 17, 2011.Fred Prouser</p>

(Reuters) - McDonald's Corp (MCD.N) reported a bigger-than-expected rise in worldwide October sales at established restaurants as it continues to outperform competitors in an uncertain global economy.

McDonald's said on Tuesday sales at restaurants open at least 13 months rose 5.5 percent globally.

Analysts were looking for a 4.5 percent gain, according to Thomson Reuters data and McDonald's had previously forecast an increase of 4 to 5 percent.

McDonald's shares initially rose about 1 percent on Tuesday but were down 0.4 percent at $94.26 by late morning. The shares are up 25 percent from a year ago.

Europe is grappling with debt worries; stubbornly high unemployment is stifling economic recovery in the United States; and, China's government is tapping on the brakes in an effort to cool inflation.

Still, McDonald's for months has reported industry-leading results.

"It's more about how well they are operating," Bernstein Research analyst Sara Senatore said, noting that the company is outpacing rivals in Europe and the United States -- its biggest markets.

McDonald's has been increasing its lead over hamburger chains including Wendy's Co WEN.N and Burger King Corp BKCBK.UL by attracting a broader range of diners than fast food's typical young adult males.

"The competition continues to be pretty weak," said Edward Jones analyst Jack Russo.

McDonald's has global reach and financial strength that is unmatched by many restaurant operators. As a result, its cost of goods is lower and it can spend more money on things like advertising and restaurant renovations.

Strong sales also have made it possible for the company to raise menu prices to offset higher food costs. Russo said those price increases bolstered October results.

The company's same-restaurant sales rose 5.2 percent in the United States, beating analysts' expectations for an increase of 4.1 percent and helped by the Monopoly game promotion.

In Europe -- McDonald's top market for revenue -- the company reported a 4.8 percent increase, better than the analysts' call for a 3.4 percent rise. The company cited strength in France, Russia and the United Kingdom. It also said results from Germany, where diners spend cautiously, were positive but not a big contributor.

Sales in Asia/Pacific, Middle East and Africa rose 6.1 percent, beating the analysts' call for a 3.9 percent rise.

Oppenheimer analyst Brian Bittner said in a client note that U.S. momentum could accelerate in November, helped by the relaunch of the popular McRib sandwich late last month.

Diners around the world are looking for ways to save money on meals away from home and McDonald's is responding in two ways.

It is promoting its low-price Dollar menu for people on tight budgets. At the same time, it is selling premium Angus beef hamburgers and a selection of high-margin drinks ranging from lattes to fruit smoothies to appeal to diners who are trading down from full-service chains.

McDonald's also is renovating its dining areas to be more modern and comfortable -- an effort that has helped results in Europe and elsewhere.

Reporting by Brad Dorfman in Chicago and Lisa Baertlein in Los Angeles; Editing by Lisa Von Ahn, Maureen Bavdek and Matthew Lewis

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