McDonald's earnings: Not lovin' it

Through the course of the recession, one solid truism has been that fast food restaurants like McDonald's (MCD) should benefit from dire economic circumstances. As customers become more cash-strapped and short on time, the iconic golden arches offer meals that are simple, quick and cheap. Perhaps just as important, McDonald's offers a familiarity that is extremely comforting.

In many ways, the chain's Q2 earnings bear this out. McDonald's had a 4.8 percent jump in global comparable sales, with a 3.5 percent increase in the US and a 6.9 percent increase in Europe. Earnings per share were $0.98.
Part of the company's strategy has been to draw in downward-drifting consumers with semi-healthy, gourmet-esque offerings like chipotle and honey mustard snack wraps. Interestingly, it has also sold its interest in premium fast food chain Pret A Manger. It seems likely that Pret's potential to compete with McDonald's, combined with the fact that the chain's interest was non-controlling, made the sale seem very attractive.

Although the recession has spurred McDonalds' growth, the strong dollar has seriously undermined its profits. The company experienced $0.09 per share of negative impact from foreign currency translation, and has seen its revenue fall seven percent, to $5.65 billion, from last year's $6.08 billion. This problem is even more pronounced when extrapolated over the first six months of the year, in which the chain's revenues of $10.7 billion represent a drop of over a billion, or eight percent, from last year.
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