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By Lisa Baertlein and Sruthi Ramakrishnan
Aug 8 McDonald's Corp said on Friday
that its global sales forecast for 2014 was at risk after a
China food scandal drove away diners and forced the chain to
scramble to find new suppliers of ingredients for Chicken
McNuggets and Big Macs.
The warning could portend the company's first full year of
global sales declines at established restaurants since 2002,
Janney Capital Markets analyst Mark Kalinowski said in a client
McDonald's global same-restaurant sales dropped a
steeper-than-expected 2.5 percent in July, which Kalinowski said
was the company's worst monthly performance in a decade.
The trouble in China hit as the world's biggest hamburger
chain was already scrambling to bolster its U.S. business, where
monthly sales at established restaurants have been down or flat
But investors were braced for bad news, and McDonald's
shares were down just 0.1 percent at $93.19 in morning trading.
McDonald's on Monday warned that sales in markets including
China and Japan were experiencing a "significant negative
impact" following a local Chinese TV report on July 20 that
showed workers at a supplier using expired meat and doctoring
food production dates.
"As a result of the China supplier issue, the company's
global comparable sales forecast for 2014 is now at risk,"
McDonald's said in a statement on Friday.
Last month, executives said they expected full-year
worldwide sales at restaurants open at least 13 months to be
"relatively flat" due to increased competition, pricing and
other cost pressures.
McDonald's said same-restaurant sales in Asia-Pacific,
Middle East and Africa (APMEA), which includes China and Japan,
fell 7.3 percent in July.
McDonald's had 35,683 restaurants in 119 countries around the
world on June 30. Roughly 2,000 of those were in China, and
about another 3,100 were in Japan.
The company did not quantify the magnitude of the sales
impact in China, where sales had just recovered from the double
whammy of a separate food safety scandal and bird flu outbreak
that crushed business there last year.
McDonald's Holdings Co Ltd, the long-struggling
Japan unit, on July 29 withdrew its full-year earnings forecast
after the China meat scare caused sales to drop 15 percent to 20
percent on a daily basis.
U.S. same-restaurant sales fell 3.2 percent in July, more
than the 2.6 percent decline expected by analysts polled by
research firm Consensus Metrix.
McDonald's has been losing ground in its home market, hurt
by tough competition from Wendy's Co and Burger King
Worldwide Inc, sluggish job and wage growth, and
consumer's diminishing appetite for processed food.
Same-restaurant sales were up 0.5 percent in Europe, where
weakness in Germany and Russia were a drag on results.
(Reporting by Lisa Baertlein in Los Angeles, Sruthi
Ramakrishnan, Devika Krishna Kumar in Bangalore; Editing by
Joyjeet Das, Saumyadeb Chakrabarty and Lisa Von Ahn)