World Business

McDonald's May sales up but sees euro drag on profit

(Agencies)
Updated: 2010-06-09 15:05

LOS ANGELES/DETROIT - McDonald's Corp reported a stronger-than-expected 4.8 percent rise in worldwide May sales at established restaurants, but said it expects a weak euro to take a bite out of full-year profits.

Roughly a quarter of McDonald's consolidated operating income originates in countries that use the euro currency, the world's biggest hamburger chain said on Tuesday.

Based on current exchange rates, McDonald's expects currency conversion to hurt full-year net income per share, versus its previous expectation for a slight benefit. The company, which gets more than half of its revenue and profits from outside the United States, gave no further details.

On Tuesday, the euro hovered near a four-year low against the dollar on concerns over a widening European debt crisis that has struck financial markets and could constrict consumer demand.

The currency fluctuations have been "wild and crazy" since McDonald's last gave currency guidance in April, Edward Jones analyst Jack Russo said.

He said the risks now are two-fold: Possible austerity measures around Europe could put a dent in consumer spending, and the strong US dollar hurts reported earnings and sales.

Related readings:  McDonald's recalls toxic Shrek glasses   McDonald's to invest 25% more capital in China  McDonald's hopes to get bigger bite of Asian markets

McDonald's rival Burger King Holdings Inc on Monday said unfavorable exchange rates, primarily tied to the euro, would cut earnings for the current quarter 1 to 2 cents a share.

However, McDonald's does not expect the weak euro will hurt results for its second quarter, which will end June 30. May sales at McDonald's restaurants open at least 13 months rose 3.4 percent in the United States and 5.7 percent in Europe.

Analysts, on average, had called for a 4 percent overall rise in May same-store sales, fueled by a 4.3 percent gain in the United States, and a 3.4 percent rise in Europe.