10/31/2014

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Business

McDonald's key revenue metric rises in August

McDonald's key revenue metric rises in August
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OAK BROOK, Ill. (AP) — McDonald's Corp. said Tuesday that a key revenue figure rose 1.9 percent in August, driven by a strong performance in Europe. Its Monopoly promotion in the United States helped lift its performance there.

The world's biggest hamburger chain reported the gain in revenue at restaurants open at least 13 months for the period ended Aug. 31. That includes a 3.3 percent increase in Europe, a 0.2 percent rise in the U.S. and a 0.5 percent decline in Asia Pacific.

This figure is a key gauge of a restaurant operator's health because it excludes results from restaurants recently opened or closed.

The monthly sales figure is a snapshot of the money spent on food at company-owned and franchised locations and does not reflect corporate revenue.

While the metric improved for McDonald's in August, it was slower growth than the 3.7 percent increase in the prior-year period. But it was faster growth than the 0.7 percent increase in July.

The company, based in Oak Brook, Ill., is trying to navigate a variety of challenges and has already said it expects the rest of this year to be challenging. To start, McDonald's is facing intensifying competition from long-time rivals Burger King and Wendy's, which have been revamping their menus and stepping up marketing.

In addition, McDonald's is trying to keep up with changing tastes by offering items people feel are fresher or healthier, such as its new chicken wraps and egg white breakfast sandwiches. But the chain has also been aggressively promoting its Dollar Menu and other deals at a time when it says people are being more careful about spending.

And it said Tuesday it has begun offering steak as an option for all breakfast sandwiches, including the McMuffin and biscuit or bagel breakfast sandwiches. The "steak on any" option has been rolling out to 9,600 McDonald's restaurants in August and September.

Analysts have expressed concern that the latter strategy could eat into profit margins. But last week, the chain said it was exploring a revamped Dollar Menu that includes items costing as much as $5 that could go national this year.

McDonald's, which has more than 34,000 locations globally, is also trying to remind people of longtime favorites and has been featuring its Big Mac in TV and online ads. It also recently expanded its lineup of Quarter Pounders, saying it wanted to capitalize on the popularity of the burger.

The 3.3 percent increase in Europe of revenue at restaurants open at least 13 months was led by the U.K., France and Russia. McDonald's said that the U.K. responded well to new blended-ice drinks. The chain anticipates trying to build demand through limited-time offerings.

In the U.S., the metric edged up 0.2 percent, down significantly from the 3 percent rise a year ago. McDonald's said it plans on strengthening its U.S. presentation with new products across its various menus and at different price points.

The metric fell 0.5 percent for the Asia Pacific region, Middle East and Africa on softness in Japan, China and Australia. The Oak Brook, Ill., company said that it faced a tough prior-year comparison, when the figure climbed 5.7 percent.

McDonald's shares rose 83 cents to $97.28 in premarket trading Tuesday about a half-hour ahead of the market opening.
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