McDonald's Sales Boosted by Cold Drinks, Hot Summer

NEW YORK -- This August's summer heat provided a U.S. sales lift for fast-food giant McDonald's, as customers came in for frappes and fruit smoothies. The results, however, weren't as strong as analysts were expecting, largely on weakness in Europe, The Associated Press reported.

The world's largest hamburger chain said August sales at restaurants open at least 13 months climbed 4.9 percent. While the performance was strong and beat growth of 2.2 percent from August 2009, it is down from July's 5.7-percent rise -- the biggest monthly increase since a 6.1-percent gain in April 2009, according to the report.

This measurement is a key for restaurant operators because it measures growth at existing locations. It excludes growth at stores that open or close during the year.

Performance in the U.S. and Asia, the Middle East and elsewhere beside Europe was strong, said Janney Capital Markets analyst Mark Kalinowski, but "Europe was the culprit."

Kalinowski expected revenue at locations open at least a year to rise 5.5 percent there. He told clients in a note Thursday that Europe's weak results could be because of France, which lowered its value-added tax on restaurant meals from 19.6 percent to 5.5 percent. That spurred a sales gain in August 2009, which created a tougher comparison, he noted.

Oak Brook, Ill.-based McDonald's reported that customers continue to be drawn to its low-cost and core menu items. Its focus on value through its $1 menu has helped the company outpace competitors, including Burger King Corp. and Wendy's/Arby's Group Inc. in the weak economy. Shoppers are limiting their meals out in restaurants, and increasingly focusing on price when they do venture out, the AP reported.

New menu items, including the highly profitable smoothies the company launched nationwide in mid-July, are also spurring sales. The drinks retail for a little more than $2 for the small size.

So far this year, through the end of August, revenue at locations open at least a year rose 4.9 percent overall, an improvement from 4.2 percent at the same time last year. The figure rose 3.3 percent in the U.S., slightly below last year's 3.5 percent. The fast-food industry is still hurting a bit in the U.S. as shoppers continue to grapple with weak job and housing markets.

Europe's performance also slowed, with the figure rising 4.8 percent there, down from 5.2 percent last year. That market too is hurting because of the economy. But the rest of the world's growth soared, rising 6.2 percent, from 3.8 percent last year, the report stated.

McDonald's said it tentatively plans to release its third-quarter results on Oct. 21.

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