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McDonald’s 4Q net income jumps 11 percent

NEW YORK — McDonald’s says net income rose by 11 percent in the fourth quarter as the world’s largest burger chain continues to attract budget-conscious customers.

Net income of $1.38 billion translated to $1.33 per share, beating the $1.29 predicted by analysts polled by FactSet.

Revenue jumped 10 percent to $6.82 billion, slightly above expectations of $6.81 billion.

McDonald’s has performed well throughout the recession and its aftermath with a two-pronged strategy. It’s continued to attract a base of cash-strapped customers by keeping prices low, and it’s been able to lure the newly budget-conscious, who in previous years might have shunned the burger chain, with new offerings like smoothies, lattes, and remodeled restaurants.

The company’s game plan is often copied by other fast-food restaurants, and its decisions on pricing, menu items and other topics serve as a bellwether for the rest of the industry.

In a statement, CEO Jim Skinner said the company plans to open 1,300 new restaurants in the coming year. The additions, which would include Japan and Latin America, would mean a net gain of about 900 restaurants to the 33,500-plus locations around the world.

McDonald’s, whose share price has climbed from about $63 to just more than $100 in the last two years, has been praised for moving to where demand is. The company gets less than a third of its revenue from the U.S. Europe makes up 40 percent, up from 36 percent five years ago. The European restaurants are performing well, growing revenue 9 percent, even “in the face of ongoing economic uncertainty,” McDonald’s said in a statement.

The region that covers Asia Pacific, Africa and the Middle East makes up 22 percent of revenue, up from 14 percent five years ago, with some of that growth focused on China. That region grew revenue by 13 percent.

Skinner said McDonald’s Corp. would continue to set aside money for renovating restaurants. The renovations have helped attract new customers but have irritated some franchisees who had to pay some of the costs.

The cost of raw ingredients will be a key topic when executives answer analysts’ questions about earnings in a conference call Tuesday morning. McDonald’s raised prices twice last year and left the door open for more increases as it struggled with rising costs for ingredients like wheat and corn. Now costs for many commodities have leveled off, but analysts will want to know if McDonald’s sees more increases in the near future.

It said in its earnings release that it expects costs for most of its commodities in the U.S. to increase 4.5 to 5.5 percent in the U.S., and 2.5 to 3.5 percent in Europe. Three months ago, it predicted increases of 4.5 to 5 percent for both the U.S. and Europe for 2011.

One comment

  1. I find it funny that some are reading this as proof that our global economy is turning around. When the cheapest place to get food is turning a record profit it just says to me that people are under the gun.