McDonald’s Corp. reports first-ever quarterly loss
OAK BROOK, Ill. (AP) – McDonald’s Corp. announced the first quarterly net loss in its history Thursday, a $343.8 million deficit reflecting an assortment of charges and write-offs aimed at helping it pull out of an unprecedented slump. While McDonald’s had warned of the loss last month, it took an unexpectedly high $810 million in charges for the fourth quarter. That news helped push its stock, which traded above $30 a share as recently as last summer, under $15 for the first time since 1995.
“We know we need to make changes,” new CEO Jim Cantalupo said on a conference call, pledging to reveal more comprehensive turnaround plans by the end of March. “I think you’re going to see a lot of changes at McDonald’s in the weeks and months ahead.”
The burger giant said it is closing 719 under-performing restaurants – primarily in the United States and Japan – including 202 that were shuttered in the fourth quarter.
But it is not giving up on expansion, disclosing plans to open another 850 traditional McDonald’s restaurants, 380 of its smaller “satellite” facilities and 150 of its other brand restaurants in 2003.
Factoring in planned closings and openings, the company said the total of traditional McDonald’s to be opened this year will be down about 40 percent from the 392 net additions of 2002.
The whopping total of charges for the quarter included $267 million for restructuring items, $359 million for restaurant closings and the reduced value of those assets and $184 million on technology write-offs.
The net loss amounted to 27 cents a share, versus a profit of $271.9 million, or 21 cents a share, a year earlier.
Excluding the charges, its operating earnings of 25 cents a share matched the consensus of analysts surveyed by Thomson First Call.
But the stock fell 37 cents, or 2.4 percent, to $14.99 in afternoon trading on the New York Stock Exchange after dipping as low as $14.65.
Revenues were $3.9 billion, up 3 percent from $3.77 billion. But sales at restaurants open at least a year – a key indicator of success – were down slightly in both the United States and Europe, its top two markets.
McDonald’s, which was founded in 1955 and has been publicly traded since 1965, has been struggling due to growing consumer weariness with fast food, a crowded restaurant market and its own problems with speed and service. It replaced Jack Greenberg with Cantalupo as CEO last month after its stock fell to 7-year lows.
Cantalupo said his first priority is to fix McDonald’s existing business, although he hasn’t abandoned the commitment to growth.
“Considering the size and nature of our business, a 10-15 percent earnings per share growth target is not realistic,” he said. “We will seek reasonable growth that creates shareholder value.”
Cantalupo, who returned to McDonald’s from retirement to take the top job, earlier this week said the company was abandoning a $1 billion technology project and closing more restaurants than previously planned.
As of Dec. 31, McDonald’s operated 31,108 restaurants in 119 countries, including 13,491 in the United States, 6,070 in Europe and 3,891 in Japan.
Of that total, 1,083 involve its partner brands: Boston Market, Chipotle, Donatos, Fazoli’s and Aroma Cafe.
For the full year, net earnings were $893.5 million, or 70 cents a share, down 45 percent from $1.64 billion, or $1.25 a share, in 2001. Revenues rose 4 percent to $15.41 billion from $14.87 billion, although sales for restaurants open at least a year dipped 2.1 percent.
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