McDonald's Announces Additional Plans to Optimize Its Existing Business; Reports October Sales
OAK BROOK, Ill., Nov 8, 2002 /PRNewswire-FirstCall via COMTEX/ -- McDonald's
Corporation (NYSE: MCD) announced today additional actions it plans to take to
optimize its existing business. These actions are consistent with the plans the
Company began outlining last month to emphasize sales growth at existing
restaurants. In addition, the Company reported October sales.
* Restructuring four countries and closing three countries.
* Closing approximately 175 underperforming restaurants in about
10 other countries.
* Eliminating 400-600 positions to control costs and reallocate
* Systemwide sales totaled $3.5 billion for October and $34.5 billion
for the first ten months of 2002, up 3% and 2%, respectively in
McDonald's expects these actions will reduce its fourth quarter 2002 pretax
income by about $350-$425 million, most of which will be non-cash. The
restructuring and closing of countries, together with the closing of
underperforming restaurants, will comprise the vast majority of this amount.
Chairman and CEO Jack Greenberg said, "These actions are the right things to do
for McDonald's shareholders, the brand and our business. We remain focused on
growing our existing restaurants' sales and we're committed to making the
changes necessary to succeed in the challenging worldwide economic and
competitive environments in which we operate. Our brand presence will remain
strong, with more than 30,000 restaurants around the world.
"Sales improved in October compared with third quarter trends, particularly in
the United States where our recent service and value efforts are clearly
affecting the competition. However, we were targeting stronger results for the
month as well as the entire fourth quarter. Given the charges described above
and recent sales performance, we will not achieve our previously announced 2002
earnings per share target. Yet, I believe the decisions we've made over the past
month will better enable us to focus on our existing assets, grow cash from
operations and improve returns for shareholders. As a result, I remain very
confident in our strategies, our brand, and our future prospects."
Restructuring Ownership in Four Countries and Closing Three Countries
McDonald's plans to restructure four international markets by transferring
ownership to developmental licensees. Under the developmental license business
structure, which McDonald's successfully employs in more than 25 markets around
the world, the licensees will own the business, including the real estate
interest. While the Company will no longer have any capital invested in the four
restructured markets, it will receive a royalty based on a percentage of sales.
McDonald's also plans to close operations in three small markets outside the
U.S. These decisions were driven by the assessment that returns in these
countries will continue to be below acceptable thresholds for the Company.
Collectively, McDonald's operates 200 restaurants in these seven countries in
the Middle East and Latin America.
Underperforming Restaurant Closings
In an effort to further concentrate its efforts on assets that have the greatest
potential, the Company has conducted a preliminary review of underperforming
restaurants and expects to close about 175 units in the fourth quarter, over and
above the usual number of closings that occur because of relocations, lease
expirations, etc. These additional closings are concentrated in 10 countries.
To better control costs and reallocate resources, the Company expects to
eliminate about 400-600 job positions, 200-250 of which are based in the U.S.
The actual number of people affected will be less, as these reductions will be
achieved in part through attrition and the elimination of open positions. The
G&A savings from this action will support our continuing goal of limiting G&A
growth to less than half the growth rate of Systemwide sales, including higher
spending on strategic technology in 2003.
Systemwide sales totaled $3.5 billion for October 2002 and $34.5 billion for the
first ten months of 2002, constant currency increases of 3% and 2%,
respectively, compared with the same periods of 2001.(1) Comparable sales for
Brand McDonald's for both periods were as follows: