Commentary: Burger chain shines in Europe, but currency woes weighView all MarketWatch First Take
McDonald's Corp. /quotes/comstock/13*!mcd/quotes/nls/mcd (MCD 69.42, -0.12, -0.17%) posted a 4.8% gain in May global same-restaurant sales on Tuesday, with all regions performing reasonably well. Expansion of fancy coffee drinks, its low-priced menu and Happy Meal tie-ins with the new "Shrek" movie (tainted drinking glasses aside) all helped boost sales. Read more about McDonald's results.
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The best results came out of Europe. Sales at restaurants open at least 13 months rose 5.7%, beating Wall Street's estimate of a 3.4% gain, according to RBC Capital Markets.
May sales were driven by major markets France, Germany, the U.K. and Russia. New products like the McWrap in Germany drove the segment's results, the company said. McDonald's has seen good results from its investments in Europe, where it spruced up restaurants, tweaked the menus and stayed open longer.
This was a reprieve from the incessant gloom we've heard about the trouble in Europe, from the shaky Greek economy to the hard-hit euro. All through earnings season companies curbed their enthusiasm about the coming year in part because of uncertainty related to Europe and whether its malaise would spread to the already-fragile U.S. economy.
But there's a catch.
McDonald's said that foreign currency rates, particularly for the beleaguered euro, which accounts for about 25% of McDonald's consolidated operating income, would weigh on the companies profit for the year. This will have "minimal to no impact" on second-quarter earnings.
The fact that McDonald's was able to do so well in Europe is a good sign for spending, but currency is still a worry and this likely won't be the last large U.S. company to suffer from the euro fallout.
-- Angela Moore, Commentary editor