McDonald's profit, December same-store sales rise

LOS ANGELES/CHICAGO (Reuters) - McDonald's Corp posted higher quarterly profit helped by strength in Europe and a small rise in December sales in the United States, where high unemployment and rampant discounting are straining results.

McDonald's shares rose 2 percent as the world's largest hamburger chain also said closely watched U.S. same-store sales were up 1 percent in December, after two months of declines.

Sales trends accelerated across all regions from November to December, Bernstein Research analyst Sara Senatore said in a client note, and McDonald's said the trend was continuing.

"As we begin 2010, McDonald's January global comparable sales trend remains positive," McDonald's Chief Executive Jim Skinner said in the earnings release.

Analysts had expected U.S. sales to be down 0.6 percent in December, RBC Capital Markets analyst Larry Miller said in a client note on Friday.

Lower food costs and the weaker U.S. dollar also helped boost profits for the quarter, Edward Jones analyst Jack Russo told Reuters.

Competition in the fast-food segment has increased dramatically in recent months, and rival Burger King introduced a $1 double cheeseburger in the United States during the fourth quarter. The price of a McDonald's Double Cheeseburger recently went above $1 in many markets after the company replaced the item on its Dollar Menu with a double burger with just one slice of cheese.

December same-store sales in Europe were up 5.1 percent, topping Wall Street's call for a rise of 4.6 percent, while the Asia-Pacific, Middle East and Africa region rose just 1 percent, missing analysts' call for a gain of 4.2 percent, Miller said.

Globally, same-store sales rose 2.7 percent for December and 2.3 percent for the quarter.

Shares in McDonald's were up 2 percent, or $1.29, to $64.50 in late morning on the New York Stock Exchange.

Stock in Burger King, the biggest U.S. rival to McDonald's were up 1.5 percent, while shares in Taco Bell, KFC and Pizza Hut parent Yum Brands Inc -- which gets a significant portion of its profits from China, were down 0.6 percent.

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McDonald's said fourth-quarter profit was $1.22 billion, or $1.11 a share, up from $985.3 million, or 87 cents a share, a year earlier.

Excluding one-time items, McDonald's earned $1.03 a share. On that basis, analysts' average forecast was $1.02, according to Thomson Reuters I/B/E/S.

Revenue, which includes sales from company-owned restaurants plus royalties from franchisees and other fees, rose 7 percent to $5.97 billion, topping analysts' forecast of $5.94 billion.

McDonald's and some other fast-food restaurants had benefited when the global economic downturn sent customers to lower-priced fare, including McDonald's Dollar Menu items.

While upscale chains like Panera Bread Co and Starbucks Corp recently reported improving sales trends from December, the economy remains difficult for many Americans and the fast-food industry has entered a cycle of sinking sales and intense promotional activity, the likes of which hobbled pricier restaurants for much of the recession.

"I still think it's going to be a challenging year for the consumer," Russo said.

Still, McDonald's is in a stronger position than many of its peers. The fast-food company has better relations with franchisees lately than Burger King and its broad global reach helps smooth sales because when some regions are weak, others tend to be stronger.

(Editing by John Wallace, Steve Orlofsky and Gunna Dickson)

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