Fuel costs eat into McDonald's sales

Burger behemoth McDonald's reported a lower-than-expected rise in sales yesterday as high fuel prices took their toll on US spending and Europe's economic woes weakened results from Germany.

The firm, which has more than 32,000 restaurants in over 100 countries, said sales at US restaurants open at least 13 months rose 2.4 per cent last month. Analysts had been looking for an increase closer to 3 per cent.

Same-restaurant sales for Europe, which contributes about 40 per cent of McDonald's total revenues, were up 2.3 per cent, against the 4.2 per cent gain Wall Street had been expecting.

France, Russia and the UK helped offset the sales decline in Germany, which has been sensitive to economic pressures.

McDonald's May results showed the potential impact of petrol prices and economic uneasiness in Europe, Jefferies & Co analyst Andy Barish said in a note. He added that a deadly E coli outbreak in Germany might weaken overall restaurant results for this month as well.

May comparable sales were up 4.3 per cent in the Asia/Pacific, Middle East and Africa (APMEA) unit, beating analysts' estimates.