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OAK BROOK, IL-The woes of commercial real estate are slowing McDonald’s Corp.’s continuing expansion in the United States, executives said at the company’s second quarter conference call. The company will open 140 to 150 freestanding units, but had planned for more.

“We had allocated the capital to grow in the U.S.,” said Ralph Alvarez, president and COO. “We’d grow more if we could get the sites.”

Instead, the company could focus on renovating older units. About 40% of U.S. units have gone through the company’s reimaging program, but the U.S. lags behind other areas such as Australia.

“There is significant work to be done,” Alvarez said. “At some point, we’ll go back to getting on a regular cycle in the US, to make sure that our brand is as contemporary as we want it to be.”

Remodeling also can continue in the UK, where Alvarez anticipated 200 to 230 units to be redone this year and for the next two or three years.

Revenues were $5.6 billion, down 7% from the same period last year. Global comparable sales increased 4.8%, with U.S. units up 3.5%, Europe up 6.9% and Asia/Pacific, Middle East and Africa up 4.4%, though China lagged, particularly in the southern portion of the nation, which has suffered from factory closings. Net income was $1.1 billion, down from $1.2 billion in the year-ago quarter. Still, analysts are optimistic.

“We believe better margin performance will support 2H09 results, even if comps remain in the low-single-digit area. Despite the mild disappointment related to recent comp trends, we consider the risk/reward on MCD attractive based on valuation and good internal operating fundamentals,” wrote analyst David Tarantino of Milwaukee-based Baird in a second quarter analysis that rated the company to outperform. “We believe a premium valuation for MCD is justified by the company’s high returns on capital (supported by EBIT margin of 27.4% in 2008), stable stream of franchise income (creating better-than-average earnings visibility), and extended track record of healthy operating performance.”

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