McDonald’s Loses $343.8m in Q4 2002 – Worse than Own Forecast

27 January 2003

McDonald’s, the planet’s largest burger chain, plunged into the red for the first time since its IPO thirty-seven years ago, posting a loss of $343.8 million (€316.78m; £210.49m), equivalent to 27 cents per share and five times worse than its December guidance of five to six cents.

This compares with a profit of $271.9m (or 21 cents) for the same period a year ago, although the latest numbers do not reflect a trading loss. Despite an across-the-board slump in revenues and margins, the fall from grace is entirely attributable to a one-off charge of $810.2m in respect of store closures and the firm’s withdrawal from three overseas markets.

The burger behemoth has closed – or plans to close – 719 underperforming restaurants, mainly in the US and Japan; a situation, say industry onlookers, that has been brought about by aggressive competition in a stagnant market and a wave of customer complaints about quality both of food and service standards.

Comparable sales, excluding new outlets, were down 1.4 % in the US, 1.9% in Europe, and 6.1% in Asia, Pacific, the Middle East and Africa. The sole exception to the downward trend was Latin America where comparable growth rose by 11.2%.

McDonald's, however, restated its commitment to its controversial ‘dollar menu’ to which it is clearly pinning its hopes, despite the fact that this has fuelled a margin-eroding price war with Burger King and other rivals across the US.

Data sourced from: Financial Times; additional content by WARC staff