| OAK BROOK, Illinois
OAK BROOK, Illinois McDonald's Corp (MCD.N) is
willing to absorb some of the higher costs for ingredients such
as oil, meat and dairy to promote customer loyalty, Chief
Executive Jim Skinner said on Thursday.
"This is not the time to be passing that on to consumers.
They have long memories," Skinner said.
U.S. consumers are weathering a perfect storm as the
economy struggles, unemployment rates increase and costs rise
for necessities such as gas and food.
"We're the value leader. We always have been, and they
expect us to continue to be the value leader," Skinner said.
McDonald's low-price dollar menu items, which include a
double cheeseburger, have been popular with cash-strapped
The menu fuels store traffic and the additional volume has
helped protect profits by knocking out some of the pressure
from higher commodity costs.
McDonald's Chief Operating Officer Ralph Alvarez also said
the fast-food purveyor will be very aggressive with value-
priced food and beverages during the summer, when gas prices
tend to rise.
McDonald's, which has outperformed most of its U.S. fast-
food rivals, has controlled for some commodity cost increases
by buying contracts to lock in future prices. It has also
offset some of the higher costs by raising its own prices.
Still, the world's biggest hamburger chain has not fully
erased the impact of higher ingredient costs.
"If you just do the math, we don't mitigate all the costs,"
On another front, Alvarez said the company has been
somewhat shielded from the impact of higher fuel prices because
many of its customers do not have to travel more than two miles
to find a store.
"We are very close to all of our customers. That provides
us some insulation," Alvarez said.
Earlier this month, McDonald's said sales at restaurants
open at least 13 months rose 5 percent globally in April,
boosted by strong results from China, Australia and Russia.
Same-store sales, a key gauge of retail health, were up 2
percent in the United States.
McDonald's forecast 2 percent or better U.S. same store
sales growth later in the year, when it plans to roll out new
McDonald's shares were up 4 cents at $58.82 in afternoon
trading on the New York Stock Exchange.
(Additional reporting by Lisa Baertlein; editing by John
Wallace and Andre Grenon)