McDonald's Reports 4.5% Sales Bump for August

Olympic Sponsorship Appears to Pay Off, at Least in Short Term

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CHICAGO ( -- McDonald's Corp. today reported same-store sales for August were up 4.5% in the U.S. -- a result one analyst estimates will be nearly double the industry average. But industry-watchers are doubtful the company can keep up that pace, especially now that the Olympics are over.

UBS analyst David Palmer predicts the Golden Arches' August performance, which also saw global sales jump 8.5% compared to August of last year, will come in "nearly double" that of the fast-food industry as a whole.

However, Mr. Palmer warned of tough choices ahead as budgets continue to tighten. "We are increasingly concerned that commodity pressure, currency drags and rising unemployment will begin to weigh more significantly on growth and diminish" earnings per share in the fourth quarter and 2009, he said.

Long-term outlook doubtful
RBC Capital Markets analyst Larry Miller, meanwhile, cautioned that the company's increased level of discounting and the sales boost from the Olympic sponsorship are not sustainable.

In accounting for its August performance, the company pointed to breakfast items, its "Olympic-themed" Southern-style chicken sandwich and biscuit promotion, and the overall price and value of its products. Also cited were beverages; the fast-feeder's iced coffee and sweet iced tea have been particularly effective at moving the needle in recent months.

"We're connecting with customers worldwide by providing a convenient, affordable and relevant restaurant experience," Jim Skinner, McDonald's CEO, said in a statement. "This ongoing commitment to customers continues to drive our momentum in every area of the world."

Thirsty summer crowds get credit
In a research note, Mr. Palmer said he believes performance was particularly strong on the coasts, particularly with iced coffee and sweet tea, which have been pushed heavily throughout the summer. He added that heavy advertising during the Olympics was another factor, although it was likely offset by inclement weather in key markets like Florida.

Mr. Palmer also pointed to the chain's successful "Star Wars: Clone Wars" Happy Meal promotion, featuring bobblehead versions of main characters from all seven films attached to some of the series' iconic spacecraft. The promotion's success flies in the face of kids'-meal wisdom, as the movie itself has been blasted by critics and was a notable box-office bomb.
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