McDonald's Sales Remain Robust, U.S. Growth Slows a Bit

CHICAGO – McDonald's Corp. (MCD) Monday said worldwide May sales at hamburger restaurants open more than a year rose 7.4 percent, but U.S. growth slowed from recent months on tougher sales comparisons.

The world's largest restaurant company said same-store sales, a key measure of retail strength, rose 7.9 percent in the United States, its largest market. Though it was the market's 14th straight monthly gain, growth slowed from stronger results in recent months.

Same-store sales in Europe, its No. 2 market, rose 4.6 percent, helped by expansion of entree-sized salads in the region, Oak Brook, Ill.-based McDonald's said.

Analysts, who had forecast sales growth would slow, said results topped expectations. Comparisons are now becoming more difficult for McDonald's as it goes up against stronger sales that marked the start of a turnaround in the United States little over a year ago.

The company has been diversifying its U.S. menu with healthier items such as salads and Happy Meals (search) with milk and fruit, improving service and extending hours of operation. Last September, it launched its first-ever global advertising campaign, in a pitch to strengthen its appeal to young adults and develop a unified marketing message.

"The numbers look really good, slightly ahead of our expectations, especially in the U.S.," said A.G. Edwards & Sons. Inc. analyst Jack Russo. "I think the comparison was tough. It was a year ago this time that they really got going on a roll."

Wall Street analysts had expected U.S. same-store sales to rise in the mid-single-digit percentage range, and those in Europe to be up in the low-single-digit percentage range.

Competition among hamburger chains has been heating up. Last week privately held Burger King Corp. (search) , the No. 2 U.S. hamburger chain, reported a 7.2 percent May increase in U.S. same-store sales at franchised outlets, its biggest gain in four-and-a-half years.

May same-store sales for McDonald's combined Asia/Pacific, Middle East and Africa region rose 11.1 percent in May.

For 2005 and beyond, McDonald's backed its earlier outlook for annual systemwide sales and revenue growth of 3 percent to 5 percent, with same-store sales rising 1 percent to 3 percent.

Shares of McDonald's, which operates more than 30,000 hamburger restaurants worldwide, eased 6 cents to $26.80 in early trading on the New York Stock Exchange.