UPDATE 2-Europe buoys McDonald's in August, but worries linger

Tue Sep 10, 2013 10:25am EDT

By Lisa Baertlein

Sept 10 (Reuters) - McDonald's Corp reported a bigger-than-expected 1.9 percent increase in global sales at established restaurants in August, after a revival in France helped drive solid results in Europe, its top market.

Although the results from the world's biggest fast-food chain soundly beat the average estimate of a 0.3 percent increase from 16 analysts polled by Consensus Metrix, McDonald's shares rose only slightly in morning trading on Tuesday.

McDonald's had a big lead over rivals during the depths of the global recession. But Chief Executive Officer Don Thompson recently has had to fight to maintain that distance as resurgent chains such as Burger King Worldwide Inc and Wendy's Co tempt still-frugal diners with low-priced "value menus" and flashy new limited-time selections ranging from "premium" pretzel burgers to indulgent bacon sundaes.

Analysts maintained their cautious stance on McDonald's, citing its continued dependence on Dollar Menu sales and uncertainty over whether new premium items such as Mighty Wings will draw customers.

"Given the company's mixed results with premium platforms thus far this year, we are maintaining our current" estimate for flat third-quarter sales at restaurants open at least 13 months, Jefferies & Co analyst Andy Barish said in a client note.

McDonald's said new premium wrap sandwiches and high-margin drinks such as blended smoothies and frappes helped bolster sales in Europe, where same-restaurant sales were up 3.3 percent in August. Sales growth resumed in France during the month, and the company also pointed to strength in the United Kingdom and Russia.

Analysts had expected a 0.1 percent fall for Europe, which just edges out the United States as McDonald's top market.

Same-restaurant sales in the United States slightly missed the mark - rising 0.2 percent in August, rather than the 0.8 percent analysts had expected.

In Asia/Pacific, the Middle East and Africa, same-restaurant sales fell less than expected, as declines in Japan somewhat eased. Sales in the region were off 0.5 percent for August, while analysts had called for a 1 percent drop.

McDonald's shares were up 0.3 percent at $96.70 on the New York Stock Exchange.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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