(Adds CEO comments starting in paragraph 8.)
By Jon Kamp
Of DOW JONES NEWSWIRES
BOSTON -(Dow Jones)- McDonald's Corp. (MCD) is not merely doing well because it has cheap offerings that attract newly frugal customers during a recession, and the company will benefit when the economy improves, Chief Executive Jim Skinner said Tuesday.
"We expect to be stronger coming out of the recession," Skinner told reporters following an address at a Boston College Chief Executives' Club of Boston luncheon.
Skinner also said he personally believes U.S. unemployment will reach or exceed 10%, up from 9.8% today, and said he doesn't anticipate consolidation among the fast-food industry's major players. Breakfast sales have been affected by unemployment, though breakfast remains "up" and is being promoted, he said.
"We're not interested in giving up business that time of the day," Skinner said.
The fast-food giant topped expectations in the third quarter and has been helped by new premium items like McCafe coffee and Angus burgers. Still, Skinner said people believe the company's performance during the economic downturn is related to consumers trading down to the company's "dollar menu" of low-cost items.
"The customer profile has really stayed the same," the executive said, while answering questions from luncheon attendees.
"We'll do better when the recession is abated and we start to see growth again in jobs and consumer confidence," he added. "We operate better in a robust economy."
In an example of how the global recession has affected the company, Skinner said McDonald's had planned to open 175 stores in China this year, but is opening 140 instead. "We're smart enough not to go into a market before it's time," he said, while adding China is still an area where the company should grow fairly rapidly in the next few years.
McDonald's is taking a hit on a much smaller scale, in Iceland, where the company's three stores are closing amid that country's economic crisis.
"It was a business model that didn't really work very well" because it required importing goods, Skinner said. "We weren't able to sustain that model there." During his Q/A with luncheon attendees, Skinner said McDonald's supports stronger U.S. regulations to enhance food safety and that the fast-food purveyor feels a responsibility for tackling the problem of obesity. He also noted McDonald's healthier fare.
During prepared remarks, Skinner talked about the need to continue innovating with new products while focusing on customer needs market-by-market and operating ethically.
The downturn "cannot be an excuse for sitting still," Skinner said.
McDonald's shares recently traded down 13 cents to $59.07.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com
(Paul Ziobro in New York contributed to this article.)