030511 McDonald's April Sales Fall, But Up In US

Chicago - McDonald's Corp. said comparable sales at its hamburger restaurants fell in April for the 14th straight month, but sales of new entree-sized salads helped its U.S. restaurants post their first gain since early last year.

Overall, same-store sales, or sales at restaurants open at least 13 months, were down 0.8%. The decline was slimmer than the 3.7% drop in March and smaller than some analysts had expected.

The Oak Brook, Illinois-based company said same-store sales in the United States, its largest market, rose 1.3%. That was the first increase since February 2002, analysts said. The company has been trying to jump-start sales at existing restaurants with entree-sized salads and improved food and service.

"The U.S. showed some nice improvement," Howard Penney, analyst at SunTrust Robinson Humphrey, said. "Salads are clearly helping. The rest of the world is still struggling."

McDonald's, the world's largest restaurant company with more than 30,000 restaurants in more than 100 countries, has been facing increased competition in the United States and weaker economies abroad.

Some analysts believe the new salads will continue to help U.S. comparable sales going forward, as the company just started advertising them late last month. The so-called premium salads come with Newman's Own dressings and replace smaller salads with fewer toppings.

But others point out that McDonald's will see increased competition on salads from Wendy's International Inc.

"With Wendy's upcoming introduction of a new salad supported by national advertising, we believe (McDonald's) salad contribution to comps will lessen throughout the quarter," John Ivankoe, analyst at JP Morgan Securities, said in a research note. He has an "underweight" rating on the stock.

Overseas same-store sales remain weak, and sales in Asia in particular were likely hurt by concern surrounding the SARS virus, an analyst said. SARS, or severe acute respiratory syndrome, has killed 580 people worldwide since it emerged in southern China in late November.

Shares of McDonald's closed down 2 cents at $18.27 on the New York Stock Exchange on Tuesday.

Same-restaurant sales in Europe, its second-largest market, fell 2.3% and same-restaurant sales fell 6.9% in its Asia/Pacific, Middle East and Africa reporting region. The company reports same-restaurant sales in constant currencies, factoring out foreign exchange fluctuations.

Total sales rose 8% to $3.6 billion, as sales in Europe and Britain were boosted by the weak dollar, which makes sales in euros and pounds worth more when translated into dollars. Factoring out currency fluctuations, total sales rose 2%.

Europe's sales also benefited from the change in the timing of school holidays to April in 2003 from March in 2002.

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