McDonald's: Limited Impact From Gas Prices

The head of McDonald's Corp.'s (MCD) North American business Thursday said higher gasoline prices has had a "limited" impact on sales and that time-strapped consumers were more dependent than ever on the convenience and value the fast-food chain offers.

"We've seen limited reaction to the gas prices," Ralph Alvarez, the head of McDonald's North American unit, said at a two-day meeting with investors. "We are much more of a necessity today than just an optional meal."

McDonald's shares rose 5 percent following the meeting, at which the world's largest restaurant company laid out plans to maintain the momentum behind its recently revitalized brand. It announced plans on Wednesday for an initial public offering of its Chipotle Mexican Grill (search) chain.

The stock rallied one day after McDonald's shares slipped 3.7 percent following comments by Chief Financial Officer Matthew Paull that the company would not pursue a new structure for its vast real estate assets.

Trading in McDonald's options had spiked in the last month on investor hopes that the company might announce a real estate deal at the meeting.

In the last three years, McDonald's has turned around its flagship U.S. business, thanks to new products like meal-sized salads, the catchy "I'm Lovin' It" global advertising campaign, later hours, and cashless payments.

Recently, however, same-store sales increases at McDonald's restaurants in the United States have slowed due to tough comparisons against strong year-ago results.

At the analyst meeting, however, McDonald's executives said more new products and efforts to remodel its restaurants would enable it to keep growing.

"Will (we) be able to keep up the momentum? I tell you the answer is yes," McDonald's President Mike Roberts said Wednesday. "We will do it by creating an even more compelling customer experience."

On Thursday, McDonald's executives said the chain was still evaluating a U.S.-wide launch of deli-style sandwiches but that expanding its chicken offerings would remain a top priority.

"We have decided to remain focused on expanding our chicken lineup," McDonald's USA Chief Marketing Officer Bill Lamar said at a meeting with analysts and investors, adding that the chain would "continue to assess" a roll-out of deli sandwiches.

McDonald's began testing the sandwiches in about 400 U.S. restaurants last year but has no current plan to expand them to the rest of the country.

Alvarez said the company was disappointed by sales of the sandwiches in Canada.

Performance of the deli line "has been below expectations," Alvarez said, adding that McDonald's had had difficulty with stepped-up competition in the Canadian sandwich market.

New products being tested or developed for the United States include a spicy chicken sandwich, a breakfast burrito, a steak burrito, and an Asian-style salad.

Early next year, McDonald's is also planning an advertised launch of its new coffee blend that will include new packaging and branding, Lamar said.

The new coffee brand is expected to help drive customer visits to McDonald's, Alvarez said.

McDonald's also recently began testing espresso-based coffee drinks in 25 restaurants.

McDonald's shares rose $1.43, or 4.52 percent, to $32.84 Thursday on the New York Stock Exchange.