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McDonald’s Modernization Plan Pays Off

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http://www.ft.com/intl/cms/s/0/43b7ede4-4690-11e1-85e2-00144feabdc0.html

›January 24, 2012 1:48 pm
By Alan Rappeport in New York

McDonald’s ended 2011 on a strong note as consumers turned to the world’s largest restaurant chain by revenues for affordable meals amid the economic uncertainty.

The company said on Tuesday that last year it recorded its strongest comparable store sales in the US since 2006, luring consumers with breakfast offerings, coffee and extended hours.

McDonald’s has recently been investing heavily in new restaurants and revamps, while its competitors have retrenched. The company’s stock price is up more than 30 per cent in the past year and has been hovering around $100 a share.

“We talk about multiple ordering points, scheduling, planning and positioning, blocking and tackling in the restaurant, with an attitude of serving more customers during those peak hours – [that] is probably the most important thing,” said Jim Skinner, McDonald’s chief executive. “It’s not rocket science.”

In the US, 40 per cent of McDonald’s restaurants are open 24-hours, and nearly 90 per cent are open at 5am. The company’s competitors, such as Yum Brands and Burger King have struggled to convince customers that they offer viable breakfast options.

Donald Thompson, chief operating officer, said the company will be rolling out breakfast across most markets to replicate the success that it has had in the US, while bringing more of its premium sandwich and hamburger offerings to its domestic market.

Mr Thompson said that McDonald’s had noticed signs of momentum among US consumers, noting increased restaurant traffic during the breakfast and dinner hours, but that the economy remained too volatile to determine if this was a sustainable trend.

However, the company’s strategy of catering to higher-end consumers with premium offerings and cash-strapped customers with its value meal has helped shield McDonald’s from the mixed economic backdrop.

Demand for McDonald’s fare was strong globally, with fourth-quarter comparable sales up 7.5 per cent year-on-year in the US, 7.3 per cent in Europe and 6.9 per cent in the rest of the world.

The company said on Tuesday that its fourth-quarter net income rose 11 per cent from a year ago to $1.376bn, or $1.33 a share, while revenues rose 10 per cent year-on-year to $6.82bn.

For the year, McDonald’s net income was up 11 per cent to $5.5bn, or $5.27 a share, on $27bn in revenues.

“Key contributors to sales were both core and new product offerings, restaurant re-imagings, and an emphasis on value and convenience,” said Sara Senatore, restaurant analyst at Bernstein Research.

Mr Skinner said McDonald’s would invest $2.9bn this year to open another 1,300 restaurants and renovate more than 2,400 existing outlets. The company will open nearly 175 in the US, 250 across Europe and 250 in China.‹