NEW YORK – McDonald’s Corp., the nation’s No. 1 hamburger chain, posted higher comparable sales Monday but warned that the stronger dollar and higher commodity costs may take some of the meat out of its first-quarter sales and profit.
Monday’s warning wasn’t much of a surprise to investors — the company had indicated in January when it reported fourth-quarter results that the dollar would hurt its profit and sales in the first three months of the year.
But the Oak Brook, Ill.-based fast-food chain was more specific Monday, saying quarterly sales will likely be off by at least $600 million and earnings could be hurt by 7 cents to 9 cents per share if foreign-currency rates stay at current levels.
The company said higher commodity costs could also hurt its quarterly results, but did not offer investors an indication about the extent of that hit.
McDonald’s also expects to report a gain of 3 cents to 4 cents per share from the sale of its minority stake in Redbox Automated Retail LLC. Redbox, the company’s last non-McDonald’s venture, rents DVDs for $1 a night out of vending machines.
While cautious on the first quarter, Chief Executive Jim Skinner said he’s still confident in the company’s fundamental strength.
“We have the right strategies in place to grow the business for the long-term and we have the operating experience to manage through the current environment,” Skinner said in a statement.
The company has been dealing with the effect of a stronger dollar for months. In its fourth quarter, which ended Dec. 31, McDonald’s saw its overall revenue dip about 3 percent, mainly due to the dollar.
Investors saw the stronger dollar effect in the fourth-quarter profit reports of many companies with large international operations. Revenue in foreign countries is typically converted into dollars, which leaves the companies’ results susceptible to fluctuations in exchange rates.
McDonald’s said global same-store sales grew 1.4 percent in February. Same-store sales are a key indicator of restaurant performance since they measure growth at existing stores rather than newly opened ones.
The increase came despite having one fewer day in February this year compared with leap year in 2008, which cut four percentage points from same-store sales. Adjusted for the calendar shift, global same-store sales jumped 5.4 percent.
McDonald’s has benefited from people’s desire to save money as the recession has deepened. More consumers appear to be visiting McDonald’s and other fast-food chains instead of paying for pricier dishes at sit-down restaurants.
U.S. same-store sales increased 2.8 percent. The boost came partly on its chicken offerings and core menu items like the Quarter Pounder, and beverages and breakfast products.
The company has been plumping up its breakfast offerings with a fried chicken biscuit and new espresso-based coffee drinks. The drinks are being rolled out nationwide and are now in more than half the company’s U.S. locations.
European same-store sales dipped 0.2 percent, but climbed 4 percent when adjusted for the calendar shift. Same-store sales for Asia/Pacific, Middle East and Africa grew 0.7 percent, or 4.1 percent when adjusted.
Shares of McDonald’s rose $1.10 to $53.22 in morning trading.
AP Business Writer Michelle Chapman contributed to this report.