McDonald's Corporation (NYSE: MCD) announced today sales performance through November 2002 and gave an outlook for fourth quarter 2002 earnings per share and an update on charges it expects for the fourth quarter.
McDonald’s comparable sales were down in all markets except Latin America during the first two months of the fourth quarter ended November 30, 2002. U.S. comps were down 1.3% for the two months ended November 30, 2002, Europe was down 1.6%, APMEA was down 5.2%, and Canada was down 2.5%. Latin America comp sales increased 10.9%. As a whole, comparable store sales declined 1.6% for the two month period and 2.0% for the eleven month period ended November 30.
McDonald's systemwide sales were $37.9 billion for the first 11 months of the year, up 2 percent in constant currencies, compared with the same period in 2001. For the two months ended November 2002, systemwide sales were $6.9 billion, up 2 percent in constant currencies, compared with the same period last year. U.S. systemwide sales totaled $18.6 billion year- to-date through November, up 1 percent, while they increased 2 percent for the first two months of fourth quarter 2002, compared with the same periods last year.
European systemwide sales totaled $9.5 billion year-to-date through November, an increase of 6 percent in constant currencies. For the first two months of the quarter, Europe's sales increased 3 percent in constant currencies. Systemwide sales in our Asia/Pacific/Middle East/Africa (APMEA) segment were $6.2 billion for the first 11 months. In constant currencies, sales in this segment declined 3 percent for the first 11 months and were relatively flat for the first two months of the quarter, compared with the same periods in 2001.
Based on early December results, the company expects Brand McDonald's comparable sales trends for the fourth quarter to be lower than the first two months of the quarter. The company also expects margins for the quarter to be lower than the comparable period last year. In addition, we expect SG&A expenses to increase approximately 12 percent for the quarter due to increased spending on advertising and technology, compared with fourth quarter 2001. Also, interest expense is expected to decline approximately 9-12 percent for the quarter compared with fourth quarter 2001. Finally, the fourth quarter tax rate excluding the charges discussed below is expected to be about 35 percent.
The company expects to record pretax charges of approximately $435 million ($390 million after tax or $.31 per share) in conjunction with the plans announced last month to restructure certain markets, close under-performing restaurants, and eliminate positions to control costs and reallocate resources. Including the $435 million of charges, the company expects a fourth quarter loss per share of 5 to 6 cents. Also, as a result of recently announced management changes, the company will review additional areas to sharpen its focus and improve results. This review could result in additional fourth quarter charges. Excluding charges, the company expects fourth quarter earnings per share to be 25 to 26 cents, including a foreign currency benefit of one to two cents. This earnings estimate before charges falls well short of the 31 cent average forecast by Wall Street analysts.
On December 5, McDonald's Corporation announced that Jack M. Greenberg would retire as chairman and CEO effective December 31, 2002 and that Jim Cantalupo, formerly vice chairman and president, would succeed him. Cantalupo is aggressively reviewing all aspects of the business and will discuss his views and near-term priorities in January.
Matthew Paull, Executive Vice President and Chief Financial Officer, noted, "This has been a difficult year and our financial performance has been below expectations. Under the leadership of Jim Cantalupo, I am confident we will improve our business, building on our strengths including our brand recognition, our position as the world's leading foodservice retailer, and our annual systemwide sales of $40 billion and annual revenues of $15 billion."
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