McDonald's profits jump. Thank Chicken McBites?
Mcdonald's saw its first quarter profits rise 5 percent in the first quarter of 2012, as a mix of old menu standbys and new items like Chicken McBites lured in more diners to McDonald's.
McDonald's ever-evolving mix of old menu standbys and new items like Chicken McBites lured in more diners who helped boost its first-quarter profit.
The world's biggest hamburger chain said Friday that its net income rose 5 percent in the first quarter, in line with Wall Street expectations.
McDonald's Corp. said global sales rose 7.3 percent at stores open at least 13 months, driven by gains from all regions. The metric is key because it excludes the impact of newly opened stores.
A big part of the McDonald's success story in recent years has been the chain's rollout of popular menu items such as coffee frappes and fruit smoothies, which have high profit margins and bring in customers throughout the day. Customers also love them because it's a way to have a treat for a couple of bucks.
Other recent introductions by the fast-food chain include oatmeal and Chicken McBites, which the company said helped boost sales in the U.S. in the first quarter.
For the first three months of the year, McDonald's reported a profit of $1.27 billion, or $1.23 per share. That compares with a profit of $1.21 billion, or $1.15 per share, in the year-ago period.
In the U.S., sales at restaurants open at least 13 months rose 8.9 percent, as new menu items like Chicken McBites, updated restaurants and warm weather drew customers. The results also benefitted from an extra day in the Leap Year.
McDonald's said sales in Europe, its biggest market, rose 5 percent despite economic turmoil and severe weather in many parts of the region. Sales rose 5.5 percent in the Asia Pacific, Middle East and Africa region, where the company is focusing its expansion efforts in the coming years.
Although McDonald's has consistently outperformed its peers in the fast-food industry, the company is facing the pressures of increasing costs for ingredients. The company's is also seeing costs for labor and rent increase in some overseas markets.
The higher expenses are particularly problematic for a chain like McDonald's, which risks driving away customers if those costs are passed on.
Still, the fast-food chain last year raised prices three times for a total price increase of 3 percent. The company has said it expects commodity costs to increase an additional 4.5 percent to 5.5 percent this year, which would be roughly in line with last year's increases.
Because of its size, the way McDonald's handles price increases can set the tone for the rest of the fast-food industry.