McDonald's Bounces Back: Company Defies Economic Slump

The Big Mac of the fast food industry is showing signs of rebounding from a rough year.

People stand in line at a McDonald's restaurant in Times Square, Dec. 10, 2012 in New York City.
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After a few bad months McDonald's posted better-than-expected sales numbers in November, and the upcoming return of the McRib sandwich could bring the company one step closer to a full-fledged comeback.

Ahead of Monday's announcement, analysts predicted the fast food giant would post a modest 0.1 percent sales increase at best. But after a year of disappointing sales and profits, executives and analysts were back to saying "I'm lovin' it."

The latest earnings report shows sales in restaurants that were open at least 13 months were up 2.4 percent globally in November, which is significantly less growth than a year ago but better than expected. United States sales, which were up 2.5 percent, were the primary source of growth. Sales were up 1.4 percent in Europe and 0.6 percent in Asia, Middle East, and Africa.

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The company said the surprising growth was due to increased emphasis on its Dollar Menu as well as the popularity of higher-end "premium" options such as the Cheddar Bacon Onion sandwich and its ice-blended drinks, which have high profit margins.

Still, the company may not be out of the fry oil just yet. In October, McDonald's' reported its first monthly decline in sales in nine years and its second consecutive quarterly decline in profits. The year's slow growth led to shake-ups in its leadership, as the president of McDonald's U.S. operations stepped down following October's bad numbers.

Analysts say the weak global economy and encroaching competition are to blame for the tepid growth, and McDonald's chief executive Don Thompson acknowledged as much in announcing the November numbers.

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"We are ... optimizing our menu, modernizing the customer experience and broadening accessibility to our Brand to move our business forward amid today's broad-based economic and competitive challenges," Thompson said in a statement accompanying the earnings release.

He added that "increasingly modern and appealing restaurants" would help address the challenges.

The McRib will also help in the short term. The cult favorite typically boosts sales when it makes its seasonal appearance on the menu. During its month-long appearance in November 2010, McDonald's credited it for increasing its monthly sales by 4.8 percent.

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Seth Cline is a reporter for U.S. News & World Report. You can follow him on Twitter or reach him at scline@usnews.com.