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09/08/02 . By David McMahon . Yahoo! News . Japan
Mcdonald's Japan Profits Slide 81 Percent
TOKYO (Reuters) - Profits slid at McDonald's Holdings Co (Japan), the nation's top restaurant chain, in the first half of 2002 after discount campaigns failed to bring back customers who stayed away due to worries over mad-cow disease.
Signaling tough times ahead, the company slashed its full-year net profit estimate almost by half to 6.16 billion yen ($50.88 million), while also lowering its sales forecasts.
The company, 54.9 percent owned by U.S. fast-food giant McDonald's Corp, said on Friday its parent-only net profit for January-June fell 81.4 percent to 1.41 billion yen ($11.65 million) and sales slumped 13.9 percent to 158.33 billion yen.
McDonald's Japan sales have tumbled steadily since September, when an outbreak of mad-cow disease in the country led families to shun its 3,800 outlets despite assurances that it uses only imported beef.
In a bid to stem declining same-store sales, McDonald's made aggressive price cuts on Monday, selling hamburgers for 59 yen, down from 80 yen, and cheeseburgers for 79 yen instead of 120 yen. For the full year through December, the company forecast a 6.16 billion yen net profit, against its prior projection of 11.45 billion yen, on annual sales of 339.43 billion yen, down from its prior estimate of 365.02 billion.
Before the announcement, shares in McDonald's Japan ended the day up 1.1 percent at 2,760 yen. Tokyo's benchmark Nikkei average rose 2.04 percent.
Shares in McDonald's Japan have lost almost 50 percent from a lifetime high of 5,080 yen hit soon after the company debuted on the Jasdaq market in July 2001.
The latest price cuts came just five months after McDonald's Japan ended a successful, two-year campaign in which it sold hamburgers at half-price, or 65 yen, on weekdays.
Other ventures such as a diversification of its food through the introduction at some outlets of a "McTokyo" menu including soup and salads, have failed to bring customers back.
Analysts say they doubt the price cuts can reverse a downtrend in same-store sales. The company has said the cuts will attract price-conscious customers, especially mothers with young children, many of whom have stopped visiting in past months.
Analysts also say the price cuts could encourage other fast-food restaurants to follow suit, adding to the deflationary pressures already
hurting the sector and weighing on growth in the world's second-largest economy as it emerges from recession.
Unlisted rival Lotteria, a hamburger chain with around 640 outlets
nationwide, said earlier this week it would slash prices of its set
menus, comprised of hamburgers, fries and drinks, by as much as 25
percent from Saturday. ($1=121.07 yen)