McDonalds Profits Drop 14%

Despite lower income, sales at restaurants open at least 13 months were up rose 5.2% worldwide, marking the 36th month in a row of comparable sales increases. Company officials attributed the higher sales to a series of successful new product introductions, longer store hours, and the use of credit and debit cards by McDonald's customers.

McDonald's executives said they are planning a major expansion in China where it will rapidly expand its chain of drive-thru restaurants, which produce as much as 80% more sales than restaurants without drive-thru service. The chain said it also plans to introduce several new menu items such as new salad options, to push sales even higher.

Net income for the period was $625.3 million, or 49 cents a share, a drop from $727.9 million, or 56 cents a share, a year earlier when several one-time items, including a favorable settlement of the firm's 2000-2002 US tax returns that added 13 cents per share to the company's income. The decline for the three months ending March 31, 2006 was the largest since the fourth quarter of 2002 when the company posted a net loss of $344 million.

Revenue for the period was $5.1 billion, up 6% from $4.8 billion a year earlier and slightly more than analysts' estimates of $5.04 billion.

Also during the quarter, the company, which operates more than 30,000 restaurants in more than 119 countries worldwide, closed several of its fast food outlets in the United Kingdom as part of a strategic review of that market's real estate portfolio. The company also completed the buyout of several franchisees in Brazil and moved forward with plans to sell off a small market in Europe to a developmental licensee, execs said. During the quarter, the firm also bought back $1 billion, or 29.5 million shares, of McDonald's stock.