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McDonald’s Japan posts ¥22 billion loss after food woes

Bloomberg

McDonald’s Corp.’s Japan affiliate reported its first full-year loss in 11 years as the fast-food chain faced fallout from food scandals and after labor disputes at U.S. ports forced it to ration french fries.

The net loss for 2014 was ¥21.8 billion ($186 million), compared with net income of ¥5.1 billion the previous year, McDonald’s Holdings Co. (Japan) said in a statement to the Tokyo Stock Exchange on Thursday. The average of three analyst estimates compiled by Bloomberg was a ¥17.5 billion loss. The company last posted an annual loss in 2003, according to data compiled by Bloomberg.

The Japanese chain has faced difficulties after customers complained of finding foreign objects in its food, including a human tooth, prompting the company to announce preventive measures including store cleanings and inspections. McDonald’s Japan on Thursday refrained from providing an earnings outlook for 2015, saying it wasn’t able to make a reasonable forecast.

McDonald’s Japan’s challenges “will include responding to consumer concerns, dealing with issues at outlets, providing support for franchisees,” Kyoichiro Shigemura, an analyst at Nomura Holdings Inc. in Tokyo, wrote in a note before the results. The food scandals make it “even harder to gauge when customer numbers and earnings will bottom out,” he wrote.

Last year’s sales fell 15 percent to ¥222.3 billion. Same-store sales last month plunged 39 percent from a year earlier, the 12th straight month of declines at the Tokyo-based company.

McDonald’s Japan has fallen 1 percent in Tokyo trading this year, compared with the benchmark Topix Index’s 0.2 percent gain.

The parent of one of the company’s suppliers, Aurora, Illinois-based OSI Group, apologized last year and reorganized its China operations after a July television report that alleged workers at its unit Shanghai Husi Food Co. were repackaging old meat. The unit supplied meat to McDonald’s in Japan, and the incident prompted the restaurant chain to take chicken products off its menu and switch sources of chicken nuggets to Thailand.

“We will have to work harder than ever to regain the confidence of our customers,” McDonald’s Japan’s Chief Executive Officer Sarah Casanova told reporters Thursday. “We will do whatever it takes.”

The company said it plans to close about 50 to 70 outlets in Japan this year, compared with 111 closings in 2014, and to open between 10 and 20 new restaurants. The Japanese chain, about 50 percent owned by Oak Brook, Illinois-based McDonald’s Corp., had 3,093 restaurants at the end of December, according to Thursday’s statement.