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Last Updated: Tuesday, 29 July, 2003, 14:48 GMT 15:48 UK
McDonald's trumpets healthy sales
McDonald's salad
Healthy food is selling like hot cakes, McDonald's says
Fast-food giant McDonald's has thanked what it called "a dramatic new difference in service, taste and relevance" for signs of a revival in its fortunes.

The company reported a fall in profits - to $471m (290m) in the three months to end-June, from $498m a year earlier - but was encouraged by an 11% jump in sales.

It attributed falling profits to the high costs of restructuring its business, including the closure of hundreds of restaurants and investment in new products.

These new products, which are deliberately slanted towards healthy eating, have sold well, the company insisted.

McDonald's financial performance in recent years has suffered from the perceived dreariness of its traditional menu.

And investors have become afraid of lawsuits from obese customers, some of whom blame the chain for their expanding waistlines.

'Only the beginning'

"I'm pleased with the strong customer response to our innovative new products," said chairman and chief executive Jim Cantalupo.

" But I'm far from satisfied. This upturn reflects only the beginning of our worldwide revitalisation plan."

McDonald's shares
Part of this plan is a drive to invest in new products, and to market them aggressively.

Mr Cantalupo heaped praise on launches such as the "McGriddle" breakfast concept, and the roll-out of wi-fi internet access in some US restaurants, both of which, he said, chime with changing lifestyles.

The other part of the recovery plan involves far tighter control of spending.

The pace of restaurant openings is being reined in: last year, the firm opened 1,000 more outlets than it closed; in 2003, the net increase will be just 360.

Pros and cons

The results, comprehensively trailed by the firm just a fortnight ago, caused only a modest 1% jump in McDonald's shares.

McDonald's has seen its shares gain by more than 50% this year, after taking a battering along with its US peers in 2001-02.

But the rebound disguises considerable lingering disquiet about the company's strategy, with some analysts concerned that it may be abandoning its core market, and others worried that current reforms do not go far enough.

In the US and especially Europe, McDonald's is in need of a change of direction, since its traditional dominance has been eroded by many consumers switching away from fatty foods.

But McDonald's seems unprepared to go ahead with a wholesale change.

"Americans love the taste of fat, sugar and salt, so they're not willing to pull away totally from that yet," food journalist Phil Lempter told BBC World Business Report.

Food journalist Phil Lempter
"Americans love the taste of fat, sugar and salt"

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