McDonald's Japan Expects 32%
Profit Drop On Mad Cow Disease
By Randall Mikkelsen and Yannis Behrakis

TOKYO - (Asia Pulse) - McDonald's Co. (Japan) Ltd. expects pretax profit to fall 32 per cent to 20 billion yen (US$165.27 million) in the business year through December, down about 7 billion yen from an earlier estimate, the company announced Wednesday.
The hamburger chain operator cited an aversion to beef on the part of many consumers due to mad cow disease fears and an increase in costs associated with advertising the safety of its beef as reasons for the downturn.
Although the company has been seen as a winner despite the deflationary environment prevalent in Japan, with promotions such as half-price hamburgers on weekdays, its earnings are being hurt by the mad cow disease scare.
Same-store sales fell 17 per cent in October from a year earlier, while the number of customers sank 14 per cent, both record monthly declines. Sales at all outlets, including new ones, also slid 12 per cent.
Sales for the full fiscal year are estimated at 358.7 billion yen, a slight increase from the previous year but 20 billion yen below earlier projections. The term is likely to see sales growth weaken for the first time since fiscal 1994.
McDonald's has switched to promoting non-beef products to attract customers, but a company executive says sales have been slow to recover despite government assurances that beef on the market is safe.
The company has spent some 500 million yen on television commercials and posters stressing the safety of its beef.
Net profit for the business year is expected to sink 36 per cent to 10.7 billion yen, down 4 billion yen from an earlier estimate.
Yoshinoya D Co. (TSE:9861), a beef-bowl restaurant chain, is also seeing earnings hurt by fears of mad cow disease. If demand for beef remains weak, many other restaurant operators are also likely to see their earnings decline.


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