McDonald's international markets prop up sales growth even as US lags

By Savyata Mishra

(Reuters) - McDonald's global comparable sales posted a surprise rise in the fourth quarter on Monday, aided by demand for its affordable burgers and fries among diners in the Middle East, Japan and China.

Shares of the burger chain rose as much as 3% in premarket trading, despite a bigger-than-expected drop in the U.S. comparable sales due to an E.coli outbreak in late October and cautious spending.

Demand pressure on fast-food chains operating in the Middle East has slowly begun to ease after widespread informal boycotts of Western fast-food chains over their perceived pro-Israeli stance in the Gaza conflict.

The surprise sales growth in the region for McDonald's offset some weakness in its largest market back home, where it reported the biggest drop of 1.4% since the COVID-19 pandemic.

KFC parent Yum Brands had last week recorded positive sales growth in the Middle East.

McDonald's and its rivals have leaned on value meals in 2024 to spur spending among customers preferring to eat meals at home.

"Value is helping McDonald's recover traffic from lower income consumers, but that the expansion of value will pressure store profits which will make it difficult to drive stronger earnings longer term," Northcoast Research analyst Jim Sanderson said.

McDonald's extended its $5 meal deal launched in June into December and introduced Chicken Big Mac in October, along with other special releases.

Customer traffic in the U.S. improved slightly in the fourth quarter compared to a year ago, the company said, but that was offset by a smaller average amount spent by customers per visit.

Customer visits were also impacted by an E.coli outbreak in October, which forced McDonald's to temporarily suspend sales of its Quarter Pounder hamburgers in a fifth of its 14,000 U.S. restaurants for roughly two weeks.

The company's global same-store sales rose 0.4% in the quarter ending December 31, compared with expectations of a 0.63% decline, according to data compiled by LSEG.

This was driven by a 4.1% rise in McDonald's business segment where restaurants are operated by local partners, led by Middle East and Japan. Company executives said in a post-earnings call that demand was stabilizing in China.

Quarterly adjusted earnings per share of $2.83 was in line with market expectations.

(Reporting by Savyata Mishra in Bengaluru and Waylon Cunningham in New York; Editing by Sam Holmes and Arun Koyyur)