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McDonald's anticipates negative impact of foreign currency exchange
June 7, 2010
McDonald's Corp. announced another strong month, with global comparable sales growth of 4.8 percent in May. The company did warn, however, that based on current foreign currency rates — particularly the Euro which accounts for approximately 25 percent of McDonald's consolidated operating income — it expects foreign currency translation to have a negative impact on net income per share for the full year.
Foreign currency translation is expected to have minimal to no impact on second quarter net income per share.
For May, performance by segment was as follows:
- United States, up 3.4 percent
- Europe, up 5.7 percent
- Asia/Pacific, Middle East and Africa, up 3.8 percent
"May marks another month of sustained sales growth, demonstrating the ongoing appeal of McDonald's unique combination of convenience, value and variety," said McDonald's CEO Jim Skinner. "Our focus on enhancing the McDonald's experience through affordable food choices, modernized restaurants and relevant marketing is giving customers even more reasons to visit McDonald's."
U.S. business momentum continued in May with results fueled by McDonald's compelling food and beverage value offerings, the recent addition of Frappes to the McCafe line-up and the popularity of the Shrek-themed Chicken McNugget and Happy Meal promotions.
(Note: McDonald's recently voluntarily recalled its Shrek-themed promotional glasses as new standards evolved for levels of cancer-causing cadmium found in the design.)
In Europe, the company's strong performance continued in, driven by positive sales growth in France, Germany, the United Kingdom and Russia. Europe's focus on four-tier menus, daypart expansion and the introduction of relevant new products like the McWrap in Germany drove the segment's results.
Asia/Pacific, Middle East and Africa's performance (APMEA) reflects broad-based strength across the segment, led by Australia and China. APMEA's emphasis on convenience, value, menu variety and restaurant reimaging contributed to May's performance.
Systemwide sales increased 5.5 percent or 6.2 percent in constant currencies for the month.
Burger King Holdings Inc. also reported that it expects unfavorable foreign currency exchange rates, primarily related to the Euro and British Pound, according to Zacks.com. The exchange rate will likely cut earnings for the fourth quarter of 2010 by 1 to 2 cents per share with a neutral to a slightly negative effect on earnings for the year.
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