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06/12/02 . By Bayan Rahman in Tokyo . Yahoo! Finance . Japan
McDonald's Japan cuts profit forcast by 91%
McDonald's Holdings, the Japanese subsidiary of the US fast-food company, on Friday cut its profit forecast by 91 per cent after its discount-price burgers failed to lure customers.
Japan's largest restaurant chain now expects group net profits of Y530m ($4.2m), down from its previous forecast of Y6.2bn and the Y10.2bn it reported last year. Sales will be 5.5 per cent lower than previous estimates for the year ending this month, at Y320.7bn.
McDonald's Japan, which is 50 per cent owned by its US parent company, in August reintroduced its cut-price-hamburger campaign in a bid to improve sales. But the policy was not enough to help the company overcome a competitive environment in a saturated sector.
"As the fast-food industry remains sluggish, McDonald's Japan could not improve the number of customers per store or the average sales per customer, and has concluded that it is difficult to achieve the targets in our previous forecast," McDonald's said.
The failure of its pricing strategy has forced the hamburger chain to scale down its plans for store openings. The company had expected to open 220 new restaurants this year but the actual number was 183. It closed 115 stores.
Sales have been hit since the discovery of mad cow disease in Japan last year and by tough competition from coffee shops such as Starbucks, Doutor and from fast-food restaurants offering Japanese noodle and rice dishes. Low-priced family restaurants are also taking away customers from the fast-food sector.
Sales in stores open more than a year have dropped every month this year compared with the same month in 2001. The company stopped its half-price hamburger campaign in February, but was forced to reintroduce it six months later after a sharp drop in the number of customers visiting its stores.
McDonald's is trying to find new hit products and has introduced salads
and curry dishes. It has also
invested in other restaurants, such as Pret A Manger, the UK sandwich
maker which entered Japan in