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McDonald's reports higher 1Q profit

A McDonald's restaurant in Springfield, Ill. The company

A McDonald's restaurant in Springfield, Ill. The company and Finley's Management Co. agreed Jan. 18, 2013, to a tentative settlement, with that money to be shared by Dearborn Heights resident Ahmed Ahmed, a Detroit health clinic, the Arab American National Museum in Dearborn and lawyers. (Oct. 21, 2008) Photo Credit: AP

McDonald's Corp. is still seeing its value meals and specialty drinks pay off with budget-conscious diners.

The world's biggest hamburger chain said Friday that its net income rose 7 percent in the first quarter, in line with Wall Street expectations.

McDonald's says global sales rose 7.3 percent at restaurants that were open at least 13 months, driven by gains from all regions. The metric is key because it excludes the impact of newly opened stores.

A big part of the McDonald's success story in recent years has been the chain's rollout of popular menu items such as coffee frappes and fruit smoothies, which have high profit margins and bring in customers throughout the day. Customers also love them because it's a way to have a treat for a couple of bucks.

Other recent introductions by the fast-food chain include oatmeal and Chicken McBites, which the company said helped boost sales in the U.S. in the first quarter.

For the first three months of the year, McDonald's reported a profit of $1.27 billion, or $1.23 per share. That compares with a profit of $1.21 billion, or $1.15 per share, in the year-ago period.

In the U.S., sales at restaurants open at least 13 months were up 8.9 percent, as new menu items like Chicken McBites, updated restaurants and warm weather drew customers. The results also benefitted from an extra day in the Leap Year.

McDonald's said sales in Europe, the company's biggest market, rose 5 percent despite economic turmoil and severe weather in many parts of the region. Sales in Asia Pacific, Middle East and Africa rose 5.5 percent, led by China, Australia and Japan.

At the same time, McDonald's is coping with rising costs for ingredients, as well as rising labor and rent expenses in some overseas markets. That led the fast-food chain to raise prices three times last year, for a total price increase of 3 percent.

Because of its size, the way McDonald's handles price increases can influence the rest of the fast-food industry.

Shares of McDonald's, based in Oak Brook, Ill., rose $1.72, or nearly 2 percent, to $95.28 in premarket trading.


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