Sales Rise At McDonald’s

McDonald’s Corporation’s (MCD) comparable sales for January 2010 showed a sluggish growth of 2.6% as against a rise of 7.1% in the same month last year, exposing its sensitivity to heavy job losses, economic conditions, and the discount war amongst fast-food chains to lure consumers.
 
The company faces stiff competition from Burger King Holdings Inc. (BKC), Wendy’s/Arby’s Group, Inc. (WEN) and Yum! Brands Inc. (YUM). However, these quick-service operators are faring better than casual dining restaurant chains, such as Cosi Inc. (COSI) and Red Robin Gourmet Burgers Inc. (RRGB), as cash-strapped consumers are trading towards fast-food centers due to their cheaper dining options.
 
System-wide sales at McDonald’s worldwide restaurants climbed 9.1% in January. However, in constant currencies, the rate of increase in system-wide sales dipped to 4.3%.

In the United States, comparable sales reverted to the negative zone after rising slightly in December 2009. Comps dipped to 0.7% in January (versus a 5.4% increase last year for the comparable month). However, the month’s results fared better than the overall quick-service restaurant industry. Value for menu items and premium menu options continued to support the month’s results.
 
In Europe, comparable sales climbed 4.3% in January (versus a 7.1% increase last year for the comparable month) fueled by strong performance in the U.K. and France, partially offset by weak performance in Germany. Sustained focus on fourth-tier items development, premium menu options, and daypart expansion contributed to sales.

Comparable sales in Asia/Pacific, Middle East and Africa (APMEA) rose by 4.3% in January (versus a 10.2% increase last year for the comparable month) buoyed by performance in Japan and Australia, but partly offset by weakness in China.
 
McDonald’s, the world’s largest hamburger chain also notified that it plans to close about 430 units in Japan in the next 12 to 18 months, and will incur an after-tax impairment charge between $40 million and $50 million, principally in the first half of the year.