McDonald's posted a second-quarter profit last night that handily topped expectations on strong international sales, but its shares dipped nearly 1% after executives said costs for ingredients like beef and chicken are heading higher.
In a bid to address mounting commodity pressures, McDonald's executives said they were exploring changes to the company's popular Dollar Menu, which contributes about 14% of US sales and has helped the company outperform its rivals by luring cash-strapped diners.
McDonald's international operations continued to grow at a brisk rate, helping to insulate the company from the housing-led US economic downturn that is hammering more upscale restaurants.
Second-quarter net income was $1.19 billion, or $1.04 per share in the quarter that ended June 30. McDonald's reported a net loss of $711.7m, or 60 cents a share, the same time last year on charges related to the sale of its businesses in Latin America and the Caribbean.
McDonald's said profit in the quarter included a gain of 10 cents per share from the sale of its minority interest in sandwich chain Pret A Manger. Currency exchange rates also worked in the company's favour, boosting results 7 cents a share.
Total revenue rose 4% to $6.07 billion, helped by a 6.1% increase in global same-store sales. The revenue also beat analysts' average forecast for $5.94 billion in overall sales.
Same-store sales, which track sales at its locations open at least 13 months, rose 7.4% in Europe, and gained 8.8% in the Asia/Pacific, Middle East and Africa segment. The US posted comparatively modest growth of 3.4% in same-store sales.
McDonald's said it expects prices for beef to be up as much as 9% in the US and Europe in 2008. Chicken and cheese costs are also headed higher, executives said. During the first half of the year, McDonald's raised prices in the US by 4% and prices across Europe were boosted by 2-4%.
