CHICAGO – McDonald's Corp. (MCD) reported a 10 percent drop in second-quarter earnings Thursday due to taxes from repatriating international profits, but extended its momentum with a modest gain in operating income.
The continued success of pricier menu additions helped results at the world's biggest hamburger chain, although its 8 percent sales growth was the lowest in two years.
The results were in line with those previewed by the Oak Brook, Ill.-based company last Friday, when it disclosed profit and sales figures well above Wall Street forecasts.
Net income for the April-through-June period was $530.4 million, or 42 cents per share, compared with $590.7 million, or 47 cents per share, in the second quarter of 2004.
Results included an incremental tax expense of 9 cents per share related to the repatriation of overseas profits under a new federal law.
Excluding that item, operating income was $1.02 billion, or 5 percent higher than the same period a year earlier.
Revenues increased to $5.1 billion from $4.7 billion, the smallest rise since the second quarter of 2003.
"We delivered solid operating results for the second quarter driven by positive global comparable sales and the continued strength of our U.S. business," CEO Jim Skinner (search) said in a statement.
The U.S. division, which encompasses more than 40 percent of the 30,000 McDonald's restaurants worldwide, has been reporting sizzling results for two years since the company slowed its expansion pace, focused more on improving existing restaurants and began a series of successful product launches. Entree-sized salads, McGriddles (search) breakfast sandwiches, white-meat chicken nuggets and chicken strips have helped boost the average amount spent by a McDonald's customer.
The next menu addition is set for Monday with the nationwide introduction of premium chicken sandwiches, priced from $3.29 to $3.89, at a time U.S. revenue growth is slowing. McDonald's is the biggest U.S. seller of chicken sandwiches, with 29 percent of its menu already chicken-based. It sells 600 million pounds of chicken a year.
Later hours at many restaurants and the expansion of 24-hour drivethrus also have aided the comeback. About 60 percent of McDonald's U.S. sales come from drivethrus.
For the first six months of the year, net income was $1.26 billion, or 98 cents per share, up 14 percent from $1.1 billion, or 87 cents per share, in 2004. Six-month revenues climbed 8 percent to $9.9 billion from $9.13 billion.