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McDonald's sees big jump in net income but may have to raise prices as costs rise

McDonald's affordable food drew even more customers in its fourth quarter, but the burger chain said it may raise prices this year as its own food tab rises.

Worries about rising costs at the world's largest hamburger chain gave some investors pause even as McDonald's ended a banner year in which it outperformed its competitors. Its emphasis on low-priced items and an expanding menu, including the limited-time McRib and its McCafe coffee line, helped sales grow all year.

McDonald's Corp., based in Oak Brook, Ill., reported that its net income rose 2 percent to $1.24 billion, or $1.16 per share, for the quarter. That's up from $1.22 billion, or $1.11 per share, a year ago.

Revenue climbed 4 percent to $6.21 billion.

The results met the expectations of analysts surveyed by FactSet.

However, the company said it expects food cost will rise 2 percent to 2.5 percent in the U.S. and 3.5 percent to 4.5 percent in Europe during the year.

McDonald's has already raised some prices in the United Kingdom to cover higher costs. The company said as prices for beef and other ingredients and other cost pressures in the U.S. become more pronounced throughout the year, it will likely increase prices to offset some, but not all, of its higher costs.

However, McDonald's management said it would raise prices selectively to avoid compromising the popularity it has gained with diners looking for low-priced meals during the down economy.

Shares of McDonald's dipped in the morning but rose 37 cents to $75.38 on Monday. They hit an all-time high of $80.94 in early December.

For the year, McDonald's net income climbed 9 percent to $4.95 billion, or $4.58 per share, from $4.55 billion, or $4.11 per share, in the prior year. Revenue rose to $24.07 billion from $22.74 billion.

McDonald's CEO Jim Skinner said in a statement that in 2011 the company plans to use about half of its $2.5 billion in capital spending to open about 1,100 new restaurants. It will spend the rest improving existing locations.

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