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Overseas Consumers Are Lovin' McDonald's

Associated Press file photo

Customers sip their morning joe at a McDonald's restaurant in London. Overseas consumers spent more at McDonald's Corp. in August than Wall Street expected, leading the nation's No. 1 hamburger chain to surprise investors by posting a big rise in global same-store sales on Tuesday.

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The Associated Press

Published: September 10, 2008

NEW YORK - Overseas consumers spent more at McDonald's Corp. in August than Wall Street expected, leading the nation's No. 1 hamburger chain to surprise investors Tuesday by posting a big rise in global same-store sales.

The chain said its worldwide same-store sales, or sales at locations open at least a year, jumped 8.5 percent during the month.

Same-store sales are a key indicator of restaurant performance because they measure growth at existing locations rather than new ones.

The increase follows a rise in global same-store sales of 8 percent in July and compares with a boost of 8.1 percent in August of last year.

Analysts were largely expecting a lower increase, with U.S. consumers cutting back on spending, pockets of economic weakness appearing in some overseas markets and the dollar strengthening against currencies abroad.

"It's a real strong performance," Morningstar analyst John Owens said. "It's impressive."

Same-store sales grew in every region. In the United States, the chain said they rose 4.5 percent, driven by the company's breakfast menu, a promotion tied to the Olympics for the Southern-style chicken sandwich and biscuit, and "everyday affordability" with a focus on beverages. In August, McDonald's priced its sweet tea at $1 nationwide.

The rise in U.S. same-store sales, though, fell short of the 6.7 percent jump in July and the 7.4 percent rise the company recorded in August 2007.

Most restaurant chains are seeing slower sales as consumers cut back on spending because of high gas prices, tight credit and the weak housing market. McDonald's - with its dollar menu and fast service - has fared better than most, but the chain has said it is not immune to the effects of the economic slowdown.

The U.S. bump either met or beat the expectations of most Wall Street analysts.

Owens said the chain served more customers during the month and may have benefited from price increases made in the last quarter.

The big surprise was the strong performance of the chain's overseas locations.

In Europe, where the economy is also slowing, same-store sales climbed 11.6 percent. Performance was particularly strong in the United Kingdom, France and Germany. Same-store sales jumped 10 percent in the Asia-Pacific, Middle East and Africa division.

Shares of McDonald's rose 77 cents, or 1.3 percent, to close Tuesday at $63.23.

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