McDonald's warning for Q3 this morning.
(PR NEWSWIRE) McDonald's Third Quarter 2002 Update
McDonald's Third Quarter 2002 Update
OAK BROOK, Ill., Sept. 17 /PRNewswire-FirstCall/ --
McDonald's Corporation (NYSE: MCD) announced today that it is lowering its
2002 earnings expectations for the full year, primarily due to lower than
expected sales in the U.S. and Europe in the third quarter and a more cautious
outlook on the fourth quarter. The Company currently expects 2002 earnings
per share to be $1.43 or better, excluding charges in the first quarter(1).
Including the charges, the Company expects annual earnings per share to be
$1.31 or better, compared with $1.25(2) in 2001. The Company expects third
quarter 2002 earnings per share of $.38 to $.39, compared with $.42 last year
including special items and $.38 excluding special items(3). These
expectations reflect a foreign currency translation benefit of one to two
cents for the third quarter, and one to three cents for the year. McDonald's
also reported that Systemwide sales for the first two months of third quarter
2002 were $7.5 billion, up 3 percent compared with the same period in 2001.
Jack Greenberg, Chairman and Chief Executive Officer, noted, "The U.S.
marketplace continues to be extremely competitive and customers have many
choices. This is why we have recently announced an acceleration of our plans
to give customers even better value, service, menu choice and experience. In
addition, the U.S. system will feature a more focused, consistent national
advertising message. These actions are designed to move our U.S. business to
a higher level, strengthen our competitive position and increase restaurant
sales and profits for the company and our franchisees. However, it will take
time before we see the full benefit of these initiatives in our earnings. We
will launch our national value advertising in October as we continue to
enhance restaurant-level training and service systems.
"In connection with this plan, beginning in 2003, we will further enhance
customers' experience through targeted investments in sales building
initiatives over the next 18 to 24 months. As part of this plan, we expect to
invest $300 million to $400 million in existing U.S. franchised restaurants in
2003. The funding decisions will be made on an individual restaurant basis
for those restaurants meeting specified standards and will be based on return
on investment criteria. To fund the additional capital expenditures related
to U.S. initiatives, we expect to moderate share repurchases to approximately
$500 million in 2003 as well as reduce global new restaurant openings."
Greenberg added, "In Europe, sales were weaker than expected,
particularly in Germany where the economy continues to contract and in the
U.K, where retail sales have slowed. In addition, our marketing messages in
these countries did not resonate as well with consumers as we had hoped.
Therefore, we are making adjustments and are optimistic that sales in these
countries will improve in the fourth quarter as our aggressive marketing plans
feature new tastes and value. France continued to perform well in the first
two months of the quarter."
McDonald's also reported the following sales results and
expectations.
Through year-to-date August, Systemwide sales were $27.7 billion, up
2 percent in constant currencies(4) over the same period last year.
Systemwide sales are expected to increase in low-single digits for the year in
constant currencies.
U.S. sales were relatively flat for the first two months of the third
quarter and grew one percent through year-to-date August compared with the
same periods last year. For the year, U.S. sales and operating income are
expected to increase in low-single digits (excluding special charges of $181.0
million in 2001(5)).
In constant currencies, European sales increased 4 percent for the first
two months of the third quarter and 7 percent through year-to-date August
compared with the same periods last year. Europe's constant currency sales
and operating income are expected to increase in mid-single digits for the
year (excluding special charges of $45.8 million in 2001(6)).
Constant currency sales in Asia/Pacific/Middle East/Africa (APMEA)
declined 2 percent for the first two months of the third quarter and 3 percent
through year-to-date August. Australia continues to perform well and we have
seen improvement in Japan as a result of their value initiative.
McDonald's is the world's leading food service retailer with more than
30,000 local restaurants in 121 countries serving 46 million customers each
day.
Certain forward-looking statements are included in this release.
They use such words as "may," "will," "expect," "believe," "plan" and other
similar terminology. These statements reflect management's current
expectations regarding future events and operating performance and speak only
as of the date of this release. These forward-looking statements involve a
number of risks and uncertainties. The following are some of the factors that
could cause actual results to differ materially from those expressed in or
underlying our forward-looking statements: the effectiveness of operating
initiatives and advertising and promotional efforts, as well as changes in:
global and local business and economic conditions; currency exchange and
interest rates; food, labor and other operating costs; political or economic
instability in local markets; competition; consumer preferences, spending
patterns and demographic trends; legislation and governmental regulation; and
accounting policies and practices. The foregoing list of important factors is
not exclusive.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
(1) The charges excluded from the guidance of $1.43 or better include a
first quarter 2002 non-cash charge of $43 million, pre and after tax
($.04 per share), primarily related to the impairment of assets in
Latin America and the closing of underperforming restaurants in
Turkey, as a result of continued economic weakness. This guidance
also excludes a first quarter 2002 non-cash charge of $99 million
after tax ($.08 per share) for the cumulative effect of adopting SFAS
142, "Goodwill and Other Intangible Assets".
(2) Includes $253 million of net pretax expense ($143 million after tax
or $.11 per share) consisting primarily of special charges related to
the U.S. business reorganization and other global change initiatives
and the closing of 163 underperforming restaurants in international
markets, partly offset by a gain on the initial public offering of
McDonald's Japan.
(3) Third quarter 2001 results included a $137 million after-tax gain
related to the initial public offering of McDonald's Japan and after-
tax charges of $84 million, related to the closing of 154
underperforming restaurants in international markets and the write-off
of technology costs. These charges and gain totaled $.04 per share.
(4) Information in constant currencies excludes the effect of foreign
currency translation on reported results, except for
hyperinflationary economies, whose functional currency is the U.S.
Dollar. Constant currency results are calculated by translating the
current year results at prior year monthly average exchange rates.
(5) U.S. results in fourth quarter 2001 included $181.0 million in
special charges related to the U.S. business reorganization and costs
incurred in connection with the theft of promotional game pieces and
related termination of a supplier.
(6) Europe's results in third and fourth quarters of 2001 included
$45.8 million in special charges related to the closing of
underperforming restaurants and global change initiatives.
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SOURCE McDonald's Corporation
-0- 09/17/2002
/CONTACT: Investors, Mary Healy, +1-630-623-6429, or Media, Anna
Rozenich, +1-630-623-7316, both of McDonald's/
/Photo: newscom.com
AP Archive: photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or +1-212-782-2840/
/Web site: mcdonalds.com /
(MCD)
CO: McDonald's Corporation
ST: Illinois
IN: FOD RST
SU: ERP
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