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McDonald's profit jumps 11% to $1.38 billion in fourth quarter

But the company's shares fall as higher ingredient costs, foreign exchange rates, higher tax rates and other matters cloud Wall Street's view of McDonald's future.

January 25, 2012|By Tiffany Hsu, Los Angeles Times
  • McDonald's Corp. saw net income jump 11% in the fourth quarter as the fast-food giant continued to attract customers with low prices.
McDonald's Corp. saw net income jump 11% in the fourth quarter as the… (Seth Perlman, Associated…)

Fast-food giant McDonald's Corp. had a solid fourth quarter, with a profit of $1.38 billion, up 11% compared with the same period a year earlier. Sales jumped 10% to $6.8 billion.

But higher ingredient costs, foreign exchange rates, higher tax rates and other matters clouded Wall Street's view of the company's future. At the end of trading Tuesday, McDonald's shares were down $2.20, or 2.2%, at $98.75.

In remarks to analysts, executives said menu price increases could be coming on top of the three increases the company instituted last year.

Chief Financial Officer Pete Bensen said McDonald's would continue to "strategically take increases to offset some but not all of our higher costs."

In addition to ingredient costs, the Oak Brook, Ill., company said it was dealing with higher costs for labor and rent in Europe, Asia, the Middle East and Africa.

Nick Setyan, a restaurant industry analyst at Wedbush Securities Inc., said that the McDonald's earnings report was "excellent" and that investors might be expecting too much of the company.

"I think that people have come to expect so much out of McDonald's," Setyan said, "that even these very good results were below what people wanted."

McDonald's executives said they plan to spend $2.9 billion this year opening 1,300 new restaurants and remodeling more than 2,400 around the world to help perk up the brand.

New menu items also are coming. First up in the U.S. are Chicken McBites, which are being launched right away and will be available until April 20.

The variation on popcorn chicken, featuring chicken breast and home-style seasoning, will be added to the company's other chicken offerings — McNuggets and the McChicken sandwich.

The McBites will be available in 3-ounce snack, 5-ounce regular and 10-ounce shareable sizes through April 20.

New menu offerings are among the tactics McDonald's is trying to stay ahead of what Chief Executive James A. Skinner called "significant head winds" in the industry.

"The global economy remains challenging with the recovery that's predicted to be slow and prolonged," he said on the conference call with analysts.

tiffany.hsu@latimes.com

Times staff writer Matt Stevens and the Associated Press contributed to this report.

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