McDonald's profit may fall as dollar gains

McDonald’s Corp., the world’s largest restaurant company, may see smaller fourth-quarter profit and sales increases as the dollar gains against other currencies and U.S. unemployment rises, Oppenheimer & Co. said.

November revenue rose 1.9 percent after the foreign- exchange impact shaved 7.7 percentage points off results, McDonald’s said today. The shares fell 2.9 percent in New York trading.

Global sales at older locations climbed 7.7 percent last month, topping some analysts’ estimates, as consumers bought more items from McDonald’s dollar menu. U.S. companies slashed 533,000 jobs in November, the most in 34 years. Faltering European economies also led to increased purchases of snack- sized sandwiches and chicken wraps.

“The strengthening of the dollar hurt total sales, although growth was strong, particularly overseas,” Peter Jankovskis, who helps manage $1.1 billion in assets at Oakbrook Investments LLC, said today in a telephone interview. The Lisle, Illinois-based firm owned almost 280,000 McDonald’s shares through September.

The restaurant company may earn 86 cents a share in the fourth quarter, Matthew DiFrisco, an analyst with Oppenheimer, said today in a research note, 1 cent less than he had estimated. He cut his revenue projection to $5.65 billion from $5.69 billion.

Sixteen analysts surveyed by Bloomberg project McDonald’s will earn 82 cents a share on average.

McDonald’s “is a relative consumer safe haven as the economy erodes, though we see risk given the recent rapid rise in global unemployment,” DiFrisco wrote.

Shares Drop

McDonald’s, based in Oak Brook, fell $1.80, or 2.9 percent, to $60.92 at 4:01 p.m. in New York Stock Exchange composite trading. Among the 30 companies in the Dow Jones Industrial Average, its 3.4 percent increase this year ranked second behind Wal-Mart Stores Inc. The index has dropped 33 percent.

Sales at U.S. locations open at least 13 months increased 4.5 percent, while European purchases advanced 7.8 percent, McDonald’s said. Analysts projected global sales would climb 5.2 percent, the median of four estimates compiled by Bloomberg.

Analysts estimated that U.S. comparable-store sales would rise 4.6 percent, based on the median of four projected by RBC Capital Markets, Morgan Stanley, Oppenheimer and Cowen and Co. Europe’s sales probably advanced 4.6 percent, they had said.

â€~Currency Effects’

“While same-store sales trends have exceeded our expectations, the impact from currency effects has been more negative,” Joseph Buckley, an analyst at Banc of America Securities LLC, said in a research note.

The dollar has gained 13 percent against the euro this year and 34 percent versus the British pound.

Higher food prices and declining home values helped push the U.S. economy into a recession last December. European Central Bank President Jean-Claude Trichet said last week the euro region’s economy will shrink next year for the first time since 1993.

Fourth-quarter earnings will be released Jan. 26, said McDonald’s, which has more than 31,000 restaurants.