McDonald’s value menu items draw in more customers during 1st quarter, pushing profit higher

McDonald’s value menu entices customers in 1Q

CHICAGO — McDonald’s Corp.’s strongest month of U.S. sales in nearly a year combined with big gains overseas to boost first-quarter profit more than 11 percent.

The fast-food giant also sees that March momentum spilling into April as it draws more customers with its breakfast value menu and increasingly popular coffee and frappes.

Wednesday’s news may point to tentatively better fortunes ahead for the nation’s restaurant industry. Even McDonald’s, which held up well early in the recession, had been squeezed by consumers cut back on eating out.

“I think that the consumer is starting to feel a little bit better,” said CEO Jim Skinner. “(But) I don’t believe that the spending levels are going to get back to pre-recession levels until people have some confidence that they’re going to have a place to go to work and can put food on the table at home or away from home.”

The March results, which showed that sales in restaurants open at least a year rose 4.2 percent last month, are markedly better than the past five months. Since October, the measure has fallen three times and never topped 1 percent. The last time the metric was that high was in April 2009 when it climbed 6.1 percent.

The figure is an important indicator of a restaurant’s health because it measures results at existing locations rather than newly opened ones.

“I believe that the results that we’re achieving are a result of our strategies around the value orientation of our menu,” Skinner said. “It is absolutely continuing to be the most important thing to our customers.”

Janney Capital Markets analyst Mark Kalinowski said the better-than-expected first quarter performance, particularly in March, was were helped by the chain’s new dollar breakfast menu and better marketing. He had expected the measure to climb 2.9 percent.

For the three months ending March 31, McDonald’s earned to $1.09 billion, or $1 per share. Those results included a 3-cents-per-share charge related to closing locations in Japan.

Wednesday’s profit compares with earnings of $979.5 million, or 87 cents per share, in the same quarter last year.

Revenue rose 10 percent to $5.61 billion — the first back-to-back boost for the figure since late 2008.

The performance was better than Wall Street predicted, as analysts surveyed by Thomson Reuters had forecast a first-quarter profit of 96 cents per share on revenue of $5.52 billion. Those estimates typically exclude one-time items.

For the quarter, though, the U.S. continued to lag other regions, even though diners were attracted to its new breakfast dollar menu and standbys like Chicken McNuggets along with the company’s new frappes, frozen coffee drinks available in nearly 90 percent of its U.S. locations.

Worldwide, sales in established restaurants rose 4.2 percent for the quarter, but the figure climbed only 1.5 percent in the U.S. Worldwide sales at restaurants open at least a year grew 4.2 percent for the quarter, with Europe climbing 5.2 percent and Asia/Pacific, the Middle East and Africa up 5.7 percent.

Still, McDonald’s, based in Oak Brook, Ill., has generally managed to do better than most of its competitors in the recession. But even its long run of revenue growth came under pressure amid high unemployment, causing revenue to slip in 2009 for the first time in more than a quarter-century.

McDonald’s shares rose 12 cents to $70.46 in midday trading Wednesday.

AP Retail Writer Michelle Chapman contributed to this report from New York.