Industry News | March 14, 2001
McDonald's First Quarter 2001 Update
Jack M. Greenberg, Chairman and Chief Executive Officer, commented, "We anticipated difficult worldwide comparisons in the first quarter due to strong marketing programs last year and the extra day in 2000 due to leap year. However, the effect of consumer concerns regarding the European beef supply has persisted longer than we expected, despite the fact that McDonald's overall safety and quality standards lead the industry and provide the benchmark for safe food around the world.
"We are taking immediate action to improve financial performance and are optimistic about returning to double-digit earnings per share growth (in constant currencies) for the remaining nine months of the year. In addition to an intense focus on building comparable sales through effective marketing, operations and menu development around the world, we are:
* Accelerating menu variety in Europe
* Strengthening communications to consumers in Europe, including messages about McDonald's high-quality and food safety standards
* Reviewing worldwide G&A budgets for cost savings opportunities, which may be reinvested in additional sales and profit building activities
* Reducing 2001 capital expenditures in certain emerging markets that have had significant economic downturns and are not rebounding as quickly as expected
"Our optimism for the year is based on these plans as well as an expectation that confidence in the European beef supply will be restored and that we'll see some improvement in weak economic conditions in other parts of the world.
"McDonald's is a strong company with great prospects, given our brand, customer acceptance, and outstanding owner/operators and suppliers. Over our 46-year history, we have had up and down cycles often driven by external factors. Currently, we are facing a short-term set of difficult circumstances, which will take some time to work through. But none of these short-term challenges have lessened our enthusiasm for the opportunity to bring the McDonald's experience to customers around the world.''
Global Systemwide sales for the first two months of 2001 were $6.2 billion, a 4 percent increase on a constant currency basis, or flat on a reported basis compared with the same period last year. These sales results were tempered by consumer concerns regarding the BSE issue in certain European markets, continuing weak economic conditions in certain markets and difficult comparisons caused by strong marketing programs and the extra trading day in 2000. The reported results were also reduced by weaker foreign currencies, compared with the year ago period, especially the Euro, the British Pound and the Japanese Yen. If foreign currency exchange rates remain constant for the rest of the year, the translation effect on our reported earnings per share for the year would be 2 to 3 cents.
In Europe, constant currency sales growth was flat for the first two months, compared with a strong 14 percent increase one year ago. Sales in the U.S. grew 4 percent for this period, compared with 6 percent growth last year in this period. Sales in Asia/Pacific, the Company's third largest segment, increased 2 percent in constant currencies for the first two months of 2001, compared with a 12 percent increase one year ago. In Latin America, sales increased 9 percent in constant currencies year-to-date. Sales in the Other segment increased 42 percent in constant currencies for the same period, primarily due to the addition of Boston Market in May 2000.
Greenberg added, "We believe that our infrastructure, management capability and global reach are significant levers for growth. People all over the world continue to increase their frequency of eating out and McDonald's continues to figure prominently in their choices. Therefore, we continue to be confident in our long-term growth opportunities.''
In conjunction with its first quarter 2001 update, McDonald's Corporation will webcast its investor conference call over the Internet on Wednesday, March 14 at 10:00 a.m., Central Time. Interested parties are invited to listen by logging on to: http://www.mcdonalds.com/corporate/investor and clicking on "Investor Webcasts'' under "Latest News''.
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