McDonald's first-quarter profits rise 4 percent as consumers opt for inexpensive eats

McDonald Corp.’s bottom line climbed 4 percent in the first quarter as consumers around the world opted for an affordable meal, the Oak Brook-based food chain reported Wednesday.

The home of the Golden Arches reported $979.5 million in net income, or 87 cents per diluted share, for the quarter ended March 31, up from $946.1 million, or 81 cents per diluted share, for the year-earlier period. Analysts polled by Zacks Investment Research Inc. had a consensus of 82 cents per diluted share.

McDonald’s said its bottom line was trimmed by 8 cents per diluted share due to an appreciating dollar, which made some foreign transactions more expensive. It gained 4 cents from selling its minority interest in Redbox Automated Retail LLC, which offers cheap DVD rentals via vending machines.

McDonald’s revenues fell 10 percent to $5.08 billion from $5.61 billion.

The fast-food maker’s worldwide comparable sales, or sales at restaurants open at least 12 months, rose 4.3 percent increase in first-quarter despite one less day due to 2008 being a leap year.

Chief Executive Officer Jim Skinner said in a press release that April comparable sales are “trending at least as strong or better than first-quarter sales in each area of the world.”

Comparable sales increased 4.7 percent in the U.S., 3.2 percent in Europe and 5.5 percent in Asia/Pacific, the Middle East and Africa. France, Russia and the United Kingdom delivered strong first-quarter comparable sales, while sales softened in China due to the country’s weak economy.

“McDonald’s business remains strong, despite the economic concerns around the world,” Skinner said in the press release.

In the U.S., increased sales of chicken, breakfast and beverages boosted McDonald's bottom line. The company recently began pumping its McCafe, putting McDonald’s head-to-head with Starbucks Corp.

McDonald’s affordable and expanded menu and its convenience have helped the fast-food chain weather a tough economic time, Edward Jones & Co. analyst Jack Russo said.

“You add all that up and it makes sense why they’re doing well,” he said.

McDonald’s distinguished itself from its competitors by offering promotions and “value-side menu items” for customers looking to “trade down,” Telsey Advisory Group LLC analyst Thomas Forte said.

McDonald’s stock closed Wednesday at $54.25, down $1.38 or 2.5 percent from Tuesday’s close of $55.63.

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