020552 McDonald's Eyes More Non-Hamburger Chains

Oak Brook, IL - McDonald's Corp. said it is looking to acquire more non-hamburger chains to help drive expansion as it faces slow growth in the saturated United States hamburger market.

"We are looking for brands with the potential to impact our business, and we're looking at things that can grow to at least 1,000 restaurants," McDonald's Chief Financial Officer Matthew Paull told investors during the company's annual shareholders meeting in Oak Brook, Illinois.

The maker of Big Mac and Quarter Pounder hamburger sandwiches said it will also add to its existing non-hamburger chains, which include Boston Market chicken restaurants, Chipotle Mexican Grill, and Donatos Pizza, among others.

The company it sees its so-called "partner" brands adding 1% to 2% to total operating income over the next five years, Paull said.

The company plans to add 70 new Chipotle restaurants this year, tapping into increasing demand for so- called "fast-casual" restaurants that emphasize fresh food at higher prices than traditional fast-food restaurants. Through March 31, the company operated 184 Chipotle units.

"We are very excited about Chipotle's long-term growth potential," Chairman and Chief Executive Jack Greenberg told reporters after the meeting.

But McDonald's mainstay restaurants have disappointed Wall Street by failing to deliver on its earnings targets for the past two years, hampered by lackluster U.S. sales, lingering fears of mad cow diseased-beef in Japan, and weak economies in Latin America.

Last month, the company posted its sixth quarterly earnings decline, dragged down by charges taken for an accounting change and closing down some restaurants overseas.

McDonald's stock price has also disappointed many investors. The stock had traded in a narrow band ranging from $25.15 to $31 over the past year, underperforming its peers in the Standard & Poor's Restaurant Index by about 4%. Shares of McDonald's were closed off 25 cents at $30.40 Thursday on the New York Stock Exchange.

"We are very optimistic about getting back to a growth rate investors would like to see, and regarding our stock price we are obviously not satisfied," Greenberg said.

Greenberg backed the company's prior 2002 earnings guidance for of $1.47 to $1.50 a share before the impact of charges and weak foreign currencies against a strong U.S. dollar.

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