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20/02/12 . Reuters . Yahoo! News . Japan
McDonald's Japan Expects Net Loss
TOKYO (Reuters) - McDonald's Japan said on Friday it expects to record its first net loss since 1973 in the year to December 31, slashing its forecast for the second time in two weeks as it brings forward costs to close 176 outlets next year.
The news from Japan's top fast food chain followed an announcement by parent McDonald's Corp. on Tuesday that it would run up its first-ever quarterly loss after cutting jobs and closing outlets as sales deteriorate in a saturated U.S. market.
McDonald's Holdings Co. Ltd. (Japan), 50 percent owned by McDonald's Corp, cut its group net forecast for the year to December to a net loss of 2.33 billion yen ($19.33 million).
Two weeks ago, the company forecast a net profit of a 530 million yen, down 91.4 percent from a year earlier.
The fast food giant's strategy of cutting some hamburger prices to the equivalent of 50 cents has failed to revive a business hurt by an outbreak of mad cow disease in Japan.
The latest revision reflects a decision to book a special loss of 4.9 billion yen to close 176 stores in 2003.
The company cut its sales estimate by 5.5 percent to 320.67 billion yen earlier this month, and kept that forecast on Friday.
It also said it still planned to pay a full-year dividend of 30 yen, the same as in 2001.
When it announced its revision two weeks ago, McDonald's Japan also said it would only open 183 new outlets in 2002, down from an earlier plan for 220 by the end of December. It plans to close 115 stores by year-end, bringing the total to 3,890.
The company said it would close more outlets than it opens in 2003, marking the first time in the chain's 31-year history that the number of stores has fallen from the year before.
Before the announcement, McDonald's Japan shares ended Friday trading up 0.5 percent at 2,010 yen.
The Nikkei average ended up 0.23 percent.
McDonald's Japan unit to shut 176 outlets next year, expects net loss for first time in decades Sat Dec 21, 1:57 AM ETTOKYO - McDonald's Japan unit has decided to close down an unprecedented number of unprofitable outlets and will finish in the red for the first time in 29 years, the company and media reports said.
Sales dropped following an outbreak of mad cow disease in Japanese herds last year, which made beef patties an extremely unappetizing option for many restaurant goers.
McDonald's Holdings Co. (Japan) Ltd. said in a statement Friday it decided to close down 176 of its 3,890 restaurants next year to "drastically improve the company's profit structure." The number of planned closings was reportedly the largest since the U.S. hamburger chain set up shop in Japan in 1971.
The measure will force the company to take an one-time charge of 4.93 billion yen (US$40.74 million), the statement said.
The company now expects a group net loss of 2.33 billion yen (US$19.26 million) for the year ending Dec. 31, reversing a profit estimate of 530 million yen (US$4.38 million) it had issued two weeks ago. It left unchanged its estimates for group sales and for group profit before tax and one-time charges, at 320.67 billion yen (US$2.65 billion) and 1.75 billion yen (US$14.46 million), respectively.
The net loss will be the first for McDonald's Japan unit since 1973.
Despite efforts to beef up menu selections and slash prices, McDonald's took a beating from the mad cow scare in Japan last September.
Although McDonald's in Japan uses Australian beef, which has not been infected with the brain-wasting bovine disease, monthly sales were down by as much as 18 percent at some outlets from the previous year.
Since Asia's first case of the brain-wasting disease turned up here in September 2001, many Japanese consumers have avoided beef, hurting business at meat shops and steak houses.
New openings next year will be kept to less than half of this year's
figure, the business daily Nihon Keizai reported.