McDonald's Records 5.6% Global Sales Increase for 2011

Fast Feeder Expects Positive Start to 2012, but Rising Prices Are a Concern

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Despite flagging consumer confidence, price increases and a shaky economy, McDonald's posted another year of strong sales gains -- its eighth year of positive same-store sales in every area of the globe.

The world's largest restaurant chain by sales posted a global sales increase of 5.6% for 2011 and a 4.8% same-store sales gain in the U.S., its best domestic performance since 2006. Net income was up 11%, to $5.5 billion, while revenue was up 12%, to $27 billion.

Sales were up 7.5% globally and 7.1% in the U.S. in the fourth quarter. Net income was up 11%. In Europe, sales were up 7.3% for the quarter and 5.9% for the year, with particularly strong performances in France, the U.K., Germany and Russia. In Asia Pacific, Middle East and Africa, sales were up 6.9% for the quarter and 4.7% for the year. The chain drew about 68 million customers a day, up from 64 million over the year earlier.

"Our performance in the U.S. was driven by a focus on our value, menu relevance and convenience," said McDonald's CEO Jim Skinner during the earnings call today. "We continue to benefit from our Dollar Menu at breakfast, which has been in place for over two years and has fortified our leadership position at breakfast as well as our position as a value leader across the entire day."

Along with plugging the breakfast Dollar Menu, McDonald's advertised core products, including Chicken McNuggets, for which it introduced new dipping sauces in the past year, and Big Mac, whose December promotion increased units by 11% over a year earlier, according to Mr. Skinner. From January through October, the chain spent about $811 million on measured media in the U.S., according to Kantar. In 2010, its spent about $888 million.

Mr. Skinner said that the chain expects January sales to be positive but that price increases are a concern for 2012. "The global economy remains challenging, with [a] recovery that 's predicted to be slow and prolonged. And our industry still faces significant headwinds, including flat to slow growth, low consumer confidence and volatile commodity prices," he said.

The potential of price increases particularly worries franchisees, especially those related to the Dollar Menu, according to a survey released last week from Janney analyst Mark Kalinowski. Though the report covered only about 30 franchisees out of 2,500 in the U.S., Mr. Kalinowski said it is a "useful tool in thinking about the sales performance of McDonald's domestic business." In general, franchisees said that price increases tend to make more consumers revert to the Dollar Menu, which can hurt their bottom line.

This year, the chain will roll out promotions for line extensions, including a blended-ice Cherry Berry Chiller drink, and new products, such as blueberry-banana-nut oatmeal. Chicken McBites, a popcorn-chicken product, launched yesterday and is available through April 20.

"We will also continue to feature our flagship core items, Big Mac, hamburger, cheeseburger, Chicken McNuggets and our world-famous french fries, all of which account for roughly 30% of our sales," said Mr. Skinner.

"As we begin 2012, we are intensifying our efforts toward the global priorities that represent our greatest opportunities under the 'Plan to Win' -- optimizing and evolving our menu, modernizing the customer experience and broadening accessibility to our brand," Mr. Skinner said in a statement.

As for potential products in the U.S., President-Chief Operating Officer Don Thompson said that "premium-based sandwiches from Europe are still products that we have opportunities with in the U.S., and I know the team is looking at that ."

In addition, McDonald's plans to open 1,300 restaurants and renovate some 2,400 restaurants throughout 2012.

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