McDonald’s profit falls on tax charge

McDonald’s Corp. reported a 10 percent drop in second-quarter earnings Thursday due to taxes from repatriating international profits but extended its momentum with a modest gain in operating income.

The continued success of pricier menu additions helped lift sales at the world’s biggest hamburger chain.

The results were in line with those previewed by the Oak Brook, Ill.-based company last Friday, when it disclosed profit and sales figures well above Wall Street forecasts.

Net income for the April-June period was $530.4 million, or 42 cents per share, compared with $590.7 million, or 47 cents per share, in the second quarter of 2004.

Results included an incremental tax expense of 9 cents per share related to the repatriation of overseas profits under a new federal law.

Excluding that item, operating income was $1.02 billion, or 5 percent higher than the same period a year earlier.

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Revenues were $5.1 billion, up 8 percent from $4.7 billion last year.

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The U.S. division, which encompasses more than 40 percent of the 30,000 McDonald’s restaurants worldwide, has been reporting sizzling results for two years since the company slowed its expansion pace, focused more on improving existing restaurants and began a series of successful product launches. Entree-sized salads, McGriddles breakfast sandwiches, white-meat chicken nuggets and chicken strips have helped boost the average amount spent by a McDonald’s customer.

The next menu addition is set for Monday with the nationwide introduction of premium chicken sandwiches, priced from $3.29 to $3.89, at a time U.S. revenue growth is slowing. McDonald’s is the biggest U.S. seller of chicken sandwiches, with 29 percent of its menu already chicken-based. It sells 600 million pounds of chicken a year.

Later hours at many restaurants and the expansion of 24-hour drivethrus also have aided the comeback. About 60 percent of McDonald’s U.S. sales come from drivethrus.