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040306 McDonald's Sales Up Nearly 14 Percent

March 05, 2004

Chicago - McDonald's Corp. said worldwide sales in its restaurants open more than a year rose nearly 14 percent in February as fresh advertising and menu items like all-white-meat Chicken McNuggets led to the highest gain the United States in 30 years.

It was the company's 10th consecutive monthly gain, following a prolonged drought. McDonald's, whose shares rose to a nearly two-year high, has focused on improving service and the menu at its restaurants. Sales were also boosted by an extra day in the month due to leap year and better weather compared with a year ago.

``This really shows that they're turning around and they're doing a good job of it,'' said Doug Christopher, analyst at Crowell, Weedon & Co. Christopher, who owns McDonald's shares, rates the stock a ``buy,'' with a current price target of $33 to $34.

Same-store sales in the United States rose 20.1 percent from a year earlier. Those in Europe, the No. 2 market for McDonald's, increased 7.7 percent.

``It was an outstanding, but unsustainably good, month,'' said John Glass, analyst at CIBC World Markets, noting the extra day. The company also had an easy comparison with the year-earlier period, when same- restaurant sales fell 4.7 percent, he said.

McDonald's sales results also lifted other fast food stocks, analysts said, with Wendy's International Inc. (WEN) and KFC and Taco Bell parent Yum Brands Inc. (YUM) both hitting all-time highs. shares of CKE Restaurants Inc. (CKR), owner of the Hardee's chain, hit an almost two-year high before dipping.

After a prolonged slump when customers complained about shoddy service and lackluster food at many restaurants, the hamburger chain segment has come roaring back with a combination of new menu items aimed at both core customers and those looking for healthier items.

For example, following on the success of entree-size salads at Wendy's, McDonald's also added entree-sized salads, paired with Newman's own salad dressing and backed by advertising targeting women. But McDonald's has also seen strong sales of its McGriddles breakfast sandwiches -- eggs and breakfast meat wrapped in two pancake sandwich halves flavored with syrup.

Traffic at hamburger restaurants rose 3 percent in 2003, outperforming the quick-serve category, which was flat, according to NPD Group, a market research firm.

February marked McDonald's sixth consecutive double-digit monthly gain in the United States, helped by the late 2003 launch of ``I'm Lovin' It,'' a global advertising campaign, and operational improvements such as longer hours and restaurant refurbishments.

Total sales at the more than 30,000 worldwide McDonald's restaurants jumped 22.6 percent last month, or 14.8 percent, excluding the effect of favorable foreign-exchange rates against a weak U.S. dollar.

McDonald's shares closed up $1.01, or 3.5 percent, to $29.85 on Friday on the New York Stock Exchange. The shares earlier on Friday touched $29.98, the highest level since June 2002.

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