(Adds Japan results, details on Yum warning)
Aug 4 McDonald's Corp said its business
has been hurt by China's latest food scare that forced
restaurants in the region to temporarily pull meat items from
An undercover local Chinese TV report on July 20 showed
workers at Shanghai Husi Food Co Ltd using expired meat and
doctoring food production dates. Regulators immediately closed
the factory, which is part of OSI Group LLC, a U.S. food
supplier and important McDonald's partner.
"While this matter will negatively impact results in the
near term, we cannot reasonably estimate the impact on full year
2014 earnings at this time," according to a regulatory filing
from McDonald's, which has just over 2,000 restaurants in China.
McDonald's warning on Monday came just days after rival Yum
Brands Inc, which has about 6,400 restaurants in China
and whose KFC is the biggest Western brand in the country, also
said the scandal was driving China customers away.
McDonald's shares dropped 0.5 percent to $93.86 at
mid-afternoon on the New York Stock Exchange.
Shares of McDonald's and Yum have fallen 5.2 percent and 8.6
percent, respectively, since the scandal broke on July 20.
McDonald's Holdings Co (Japan) Ltd on July 29
withdrew its full-year earnings forecast after the China meat
scare caused sales to drop 15 to 20 percent on a daily basis.
The company, which has more than 3,100 restaurants in Japan,
previously had forecast an operating profit of 11.7 billion yen
($115 million) for 2014.
McDonald's affected markets account for about 10 percent of
its total revenue, the world's largest burger chain said in its
filing on Monday.
About 15 percent of operating profit at McDonald's comes
from its Asia/Pacific, Middle East and Africa unit that includes
China and Japan, analysts said.
The warning from McDonald's prompted Janney Capital Markets
analyst Mark Kalinowski to cut his earnings per share estimates
for the fast-food chain by 3 cents to $1.55 for the third
quarter, and by 1 cent to $1.43 for the fourth quarter.
Yum on July 30 warned that the scandal had hurt sales badly
at its KFC and Pizza Hut restaurants over the previous 10 days.
Yum got 35 percent of its operating profit from China last
year and is more exposed to the market than McDonald's.
Yum did not quantify the impact of the China scandal on its
profits, but said that a sustained, significant sales impact
would "have a material effect on full-year earnings per share."
The double whammy of a food safety scare and bird flu in
China battered sales at McDonald's and Yum last year. Those
sales had just stared to recover when the latest food scandal
(Reporting by Lisa Baertlein in Los Angeles and Siddharth
Cavale in Bangalore; Editing by Savio D'Souza and Richard Chang)