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McDonald’s Profits Rise Slightly

January 22, 1998

CHICAGO (AP) _ McDonald’s Corp. said Thursday its fourth-quarter profits inched higher despite disappointing sales at its domestic restaurants and weaker foreign currencies that hurt profits abroad.

The fast-food chain said earnings for the last three months of 1997 were $410.9 million, or 58 cents a diluted share, from $410.0 million, or 57 cents a diluted share, in the same period a year earlier.

The earnings were 2 cents below Wall Street expectations of 60 cents a share, according to a survey of analysts by First Call Corp. But McDonald’s shares edged up 50 cents to $47.87 1/2 a share on the New York Stock Exchange.

Systemwide sales, which included franchised restaurants, rose 3 percent in the quarter to $8.5 billion from $8.28 billion. The company’s revenues rose 5 percent to $2.95 billion from $2.8 billion.

The Oak Brook, Ill.-based company said the strong U.S. dollar and weak foreign currencies in some of the company’s key international markets affected both sales and profits.

McDonald’s increasingly has been relying on international sales to boost its earnings, but weak economies affected performance in Australia, Germany and Japan _ three countries that contribute a large share to the company’s bottom line.

Domestically, the company reported sales at stores open at least a year were ``slightly negative″ for the quarter but did not reveal the percentage, as is its practice. Comparable store sales are used as an industry measure of performance, and analysts have said the recent increased competition with Burger King and Wendy’s has taken business away from McDonald’s.

But despite Burger King’s largest product introduction ever, of a reformulated french fry that it contends beat McDonald’s vaunted fry in taste tests, McDonald’s reported sales of its french fries were sharply higher in the quarter.

Analysts have speculated the highly publicized competition between the two chains actually benefited McDonald’s because it encouraged consumers to test both brands to see which they liked best.

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