First-quarter profit increased 22% at McDonald's, and revenue increased 11% (7% in constant currencies). Income from continuing operations increased 33%. In March, McDonald's managed its 48th consecutive month of positive same-restaurant sales in the U.S., an impressive run indeed. McDonald's said in the footnotes that U.S. sales were primarily driven by its breakfast business and the ongoing appeal of new products like the Snack Wrap. (As per usual, McDonald's did not include a balance sheet or cash flow statement in its press release, although its 8-K on www.sec.gov includes some supplemental data that's useful.) Its earnings of $0.62 per share were on par with analysts' estimates.
The quarter wasn't much of a surprise, but McDonald's also announced that it will franchise 1,600 restaurants in Latin America and the Caribbean. It will receive $700 million in proceeds from the move, but bear in mind it will also record a $1.6 billion charge in the current quarter. The company said this will benefit shareholders by reducing volatility and help focus management's attention on the markets with the greatest impact on results. The company said it will use the proceeds to increase its dividends and share repurchases to $5.7 billion in 2007 and 2008.
The franchising news jogged my memory -- I couldn't help but recall that in 2005, activist shareholder Pershing Capital (the same one that moved for Wendy's
Anyway, suffice it to say that McDonald's good times didn't look like a foregone conclusion several years ago. Its turnaround has most certainly been a success, making rivals like Burger King
There's more McDonald's on the menu:
- Could it be -- farewell to the Happy Meal?
- McDonald's has got a thirst for power with its new beverages.
- Last quarter, McDonald's beefed up profit.