McDonald’s Holdings Co. – Ltd. said Friday it posted a group net loss of 2.34 billion yen for the business year through December, sinking into the red for the first time in nearly three decades under the heavy cost of store closures.
The firm also said outlet openings will be reduced to 75 from 117 in 2002, leading to the first-ever net decrease of outlets since the chain debuted in Tokyo’s Ginza district in July 1971.
“Despite offering a menu responding to customers’ needs and actively pursuing a complex marketing strategy in severe market conditions, we couldn’t achieve the planned results,” said Yasuyuki Yagi, president of McDonald’s Holdings Co. (Japan).
Consolidated sales for 2002 stood at 320.71 billion yen while group operating profit came to 3.94 billion yen.
Comparable figures for the preceding year were not available as the fast food operator adopted a holding company structure in July.
The announcement was in line with the firm’s revised outlook issued in December, when the struggling chain decided to book a one-time charge of 4.93 billion yen over the planned closure of a record 176 unprofitable outlets this year.
The net loss was the first since 1973 for the chain, which operates 3,900 outlets nationwide.
The firm said it expects to return to the black this fiscal year, forecasting a group net profit of 3.96 billion yen on revenue of 328.27 billion yen.
It said it will achieve the target by focusing resources on existing stores, noting that the chain has earmarked 10 billion yen for refurbishing existing outlets this year, more than triple the sum spent on stores in previous years.
Still reeling from a downturn in beef consumption following the discovery of mad cow disease in the fall of 2001, the company has boldly played with menu prices in an attempt to lure consumers. Ironically, however, the price tampering has done little beyond confuse consumers.
After seeing a customer drain following the end of a weekday half-price hamburger campaign in February 2002, the chain slashed the price of its burgers to an all-time low of 59 yen in August.
But the mark-down failed to win back consumers. Same-store sales in 2002 fell 12.1 percent from the previous year.
And the roller-coaster pricing continues. On Monday, the firm marked up cheeseburgers from 79 yen to 120 yen and hot dogs from 75 yen to 150 yen, while keeping the price of hamburgers at 59 yen. Double cheeseburgers went from 220 yen to 179 yen.
“We are not pricing at random, it is based on our planning, but I think we need to present clear messages to avoid customer confusion,” Yagi said.
He vowed the firm will deliver 4.7 percent same-store sales growth for the current year by introducing an attractive menu and stepping up its marketing drive by targeting its core client groups: families with children and people aged 19-29.
He added that the chain will also work on improving its counter service, noting that sales can be boosted by 1 percent for every six seconds shaved off the time it takes to serve a customer.
The share price of McDonald’s Holdings Co. (Japan) has been on a steady decline after peaking at 5,080 yen following its debut on the Jasdaq market in July 2001. It closed at 1,770 yen in Friday’s session.
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