McDonald's Europe Sales Hit by Mad Cow
O A K B R O O K, Ill., Dec. 11, 2000 -- McDonald’s Corp., the world’s largest fast-food chain, said today it sees 2000 profits growing at the low end of forecasts as the beef crisis in Europe scares customers away from hamburgers.
The Oak Brook, Ill.-based company said it expects earnings to grow 10 to 11 percent this year, after November sales turnedout to be surprisingly strong in the United States andAsia-Pacific region but weaker in Europe, where one-quarter ofits food is sold.
Europe first began spotting cases of the brain-wastingbovine spongiform encephalopathy, or BSE, in November, incountries that include Germany, France and Spain. The outbreakhas sparked quality control actions by the European Union andconcern among consumers who are looking to eat more non-beefproducts.
Confidence Dips on Beef Supply
“Sales in certain European countries were tempered by thedecline in consumer confidence regarding the safety of theEuropean beef supply,” McDonald’s Chairman and Chief ExecutiveJack Greenberg said in a statement released early today.
McDonald’s reported November systemwide sales of $3.2billion, up 4 percent from the same period last year. This wasled by the United States, where sales of Big Macs, French friesand other products rose 7 percent to $1.57 billion.
The company said sales in Europe fell 11 percent fromNovember 1999 to $670.6 million. Comparable sales atrestaurants open for at least one year in Europe were down inthe low single digits on a percentage basis, McDonald’s said.
McDonald’s stock rose $1 or 3.4 percent to $30 in earlyafternoon trading on the New York Stock Exchange.
Analysts said investors cheered what McDonald’s called a“mid-single digit” percentage rise in same-store sales in theUnited States and Asia in November. Mad cow disease is alsoexpected to have a short-term impact.
“The strong comps are definitely encouraging,” said LehmanBros. restaurant analyst Mitchell Speiser.
Better-than-expected December?
“We believe that the quick recovery time from consumersregarding mad cow disease is not likely widely reported, whichmeans December could turn out better than investors are lookingfor,” said Salomon Smith Barney analyst Mark Kalinowski in areport published today.
McDonald’s is expected earn $1.49 for full-year 2000, basedon a recent poll of analysts by First Call/Thomson Financial.
The company had previously forecast earnings-per-sharegrowth of 10 to 15 percent for 2000, excluding the impact of astrong U.S. dollar. It reiterated an estimate that the dollarwould shave about 7 cents a share off this year’s profits.
McDonald’s lower profit expectations may also stem fromshrinking profit margins in Asia where heightened competitionhas prompted the company to periodically run discountpromotions, such as its “weekday value program” in Japan, tospark traffic, said Raymond James analyst Damon Brundage.
Year-to-date, McDonald’s said its sales rose 5 percent to$36.8 billion, from $35.1 billion in the year-ago period.