The Strategist

McDonald's Loses Profits due to Failure in the East

04/22/2015 - 16:30

The world's largest fast-food chain McDonald's Corp reported a decrease in revenue in the first quarter by 11% compared with a year earlier. Net profit for the period decreased by 32.6%. As noted in McDonald's press release, the deterioration of the financial results are associated with scandals on products quality in China and Japan’s restaurants of the chain, as well as the high level of competition in the United States.

McDonald's revenue in the first quarter was $ 5.96 billion versus $ 6.7 billion a year earlier. Net income fell to $ 811.5 million, or $ 0.84 per share, while in the same period last year, it was $ 1.2 billion or $ 1.21 per share. Analysts on Wall Street polled by Thomson Reuters expected rate of $ 1.06 per share on revenue of $ 5.96 billion.

The company's report says that global comparable sales in restaurants, working at least for 13 months, fell in the first quarter of 2015 by 2.3%. This revenue chains in the US fell by 2.6% in Europe - by 0.6% in the Asia-Pacific, Middle East and Africa - by as much as 8.3%. McDonald's explains the situation in the Eastern markets by the closure of "strategic" restaurant chain and negative indicators of sales in China and Japan.

President and CEO Steven Easterbrook said that McDonald's would do everything possible to improve the financial results of the restaurant chain. "We are developing a crisis management plan to improve our work and guarantee steady growth in profits. We look forward to sharing the details of this plan May 4, 2015, - said the top manager.

Few days ago McDonald's announced its intention to close the 131 restaurant network in Japan in connection with losses due to numerous complaints of visitors. Japanese subsidiary companies reported that awaits the financial losses of $ 317.8 million at the end of this year. This will be the first corporation’s annual loss for the last 11 years. McDonald's restaurants in the country were repeatedly involved in consumer scandals. For example, a human tooth was found in a package of French fries at one restaurant in Osaka Prefecture. Another incident occurred in Fukushima, due to being in a piece of hard plastic, injured a child, in chocolate ice cream. In China, McDonald's reputation has also proved hopelessly corrupt: at the end of July last year, it became known that the company bought expired meat in Shanghai. As a result, restaurant chain recorded a strong outflow of China’s visitors.

McDonald's Corporation is US fast-food chain, which is considered the largest in the world in the segment of fast food. Serves approximately 68 million customers daily in 119 countries around the world. Number of restaurants is estimated at 35,000. As of the 2014, McDonald's took place in the list of 186 largest public companies in the world’s rating Forbes Global 2000.