How McDonald's in Europe are beating their American counterparts

While sales in the US are continuing to slow, European franchises are exceeding analyst predictions.

Charles Platiau/Reuters
A McDonalds fast food restaurant near the entrance of a Metro station in Paris in February. Sales at the fast-food franchises in Europe helped offset continued weakness in the United States last month.

McDonald's Corp posted a smaller-than-expected drop in worldwide sales at established restaurants in May after a lift from value meal deals in Europe helped offset continued weakness in the United States, its top market for profit.

The world's biggest restaurant chain by revenue is fighting to lure back customers lost to slower service, more nimble rivals and increasing consumer demand for fresh, less-processed food.

Shares of the world's biggest restaurant chain by revenue inched up 0.2 percent to $95.39 in midday trading.

Global sales at McDonald's restaurants open at least 13 months fell 0.3 percent in May, marking a full year of monthly sales declines. Analysts polled by research firm Consensus Metrix had expected a decline of 0.9 percent.

European sales were up a better-then-expected 2.3 percent.

The biggest boost came from the United Kingdom, which served up strong results from its "Great Taste of America" campaign, Bernstein analyst Sara Senatore said in a client note.

Germany and France each were up slightly after promoting "everyday value" and premium food. Analysts had expected sales in Europe to rise just 0.6 percent.

U.S. same-restaurant sales disappointed, dropping 2.2 percent in May. Traffic to its domestic restaurants fell again as rivals, ranging from sandwich chain Chick-fil-A to burrito seller Chipotle Mexican Grill, continued to pick off customers. Analysts had expected a decline of 1.7 percent.

McDonald's USA is running a variety of tests aimed at luring back customers. Those tests include extended breakfast hours, custom burgers and new food such as breakfast bowls made with kale and spinach. Frustrated franchisees are clamoring for the company to trim and simplify its massive menu, which they blame for service slow-downs that turn off diners.

May sales were off 3.2 percent in the Asia Pacific, Middle East and Africa (APMEA) region, less than analysts' estimate for a 3.8 percent drop. Japan and China, which are still grappling with fallout from food safety scandals, weighed on APMEA results.

McDonald's new Chief Executive Steve Easterbrook recently said the fast-food giant would join other companies that only report quarterly same-store sales. June will be the final monthly sales report for the chain.

Most major U.S. restaurants and retailers, including Wal-Mart Stores Inc, Target Corp and Starbucks Corp, report only monthly same-store sales.

Those companies say monthly sales reports add costs and put too much emphasis on short-term performance. (Reporting by Lisa Baertlein in Los Angeles and Nayan Das in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Zieminski)

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