McDonald's Same-Store Sales Rose 3.3% in Fourth Quarter

But Increase of Only 1.5% Expected for January

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CHICAGO (AdAge.com) -- McDonald's Corp. released its fourth-quarter results today, reporting an impressive 3.3% increase in U.S. same-store sales for the quarter. The company noted a 2% drop in December sales from the year-ago month, however, and projected only a 1.5% increase for January. Company shares fell 6%, closing at $51.07, on the news.

In recent quarters, the company has been an example of what fast food can rake in during tough economic times. Same-store sales in the U.S. were up 4.4% in November and 6.2% in October.

'Everyday affordability'
"Historically, McDonald's has not been as affected by a slowdown in consumer spending as other retailers because of the everyday affordability," McDonald's CEO Jim Skinner said during a call with analysts. "While we generate better results in a booming economy, like everyone else, we have navigated through tough times before, and we're confident that we can do it again."

Darren Tristano of researcher Technomic noted that McDonald's performance is still relatively strong.

"So many of the public restaurants are down 50% from 52-week high," he said. "[McDonald's is] still a very strong company."

The burger chain said it has become evident that its customers are watching their disposable income more closely, with many shifting to value-menu items. These transactions make up about 14% of sales, which Mr. Skinner said is not historically high. He noted that a number of premium products are expected to balance the shift, including the new Southern-style chicken biscuit, McSkillet breakfast burrito and premium-roast coffee. While the company is beginning the rollout of espresso drinks, revenue from those items won't be fully realized until late 2009.

Franchisee decision making
Ralph Alvarez, chief operating officer, said many franchisees will have the opportunity to make decisions based on their own market.

"We spend more than half our money locally, and that's on purpose so our franchisees closest to the business in those specific markets can have the right programs in place that are best for that market," Mr. Alvarez said.

One thing is for sure, though. The tough economy won't give way to price cuts, said Chief Financial Officer Pete Bensen.

"You're not going to see an all-out return to burger wars, where were discounting our core sandwiches and getting into strictly a price competition," he said.

Mr. Tristano said December was a bad month for retail and that most chains were down. McDonald's, which has been reporting strong comparable results for several years, may simply be a victim of its own success.

"We're seeing that people are really are battening down the hatches and taking a close look at what they have in their pocket at the end of the day," he said. "It's not surprising to see [McDonald's] as low as they are but they're still on the positive side."
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