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McDonald’s to shutter 220 stores in China and US

/ 02:55 PM April 25, 2015
 AP FILE PHOTO

AP FILE PHOTO

McDonald’s  Corp,  the  world’s  largest  fast-food  chain,  is  to  close  350  stores  globally,  including 220  in  China  and  the  United  States.

The  company  said  the  move  is  in  reaction  to  an  8.3  percent  slump  in  first-quarter  comparable sales  in  the  Asia  Pacific,  the  Middle  East  and  Africa,  which  it  blamed  on  the  impact  of  what  itcalled  prolonged,  broad-based  consumer  perception  issues  in  Japan,  and  negative  but improving  performance  in  China.

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Global  comparable  sales  dropped  2.3  percent,  reflecting  negative  customer  traffic  in  all  major segments,  resulting  in  a  28  percent  slide  in  the  company’s  overall  consolidated  operatingincome.

During  the  quarter,  its  operating  income  from  the  Asia  Pacific,  the  Middle  East  and  Africa declined  80  percent  due  to  strategic  restaurant  closings  and  other  charges,  on  top  of  the issues  in  Japan  and  China,  it  said.

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The  fast-food  restaurant  company  is  expecting  130  stores  to  close  in  Japan,  but  it  did  not respond  to  China  Daily’s  inquiry  on  the  specific  number  of  stores  being  shuttered  in  China.

Kevin  Ozan,  McDonald’s  chief  financial  officer,  said  that  April’s  global  comparable  sales  are also  “expected  to  be  negative”.

McDonald’s  is  considered  the  world’s  leading  global  food  service  retailer  with  over  36,000 locations.  More  than  80  percent  of  those  are  owned  and  operated  as  independent businesses.

Yum  Brands  Inc,  the  parent  company  of  Taco  Bell,  KFC  and  Pizza  Hut,  is  also  still  struggling in  China,  where  sales  declined  6  percent  in  the  first  quarter,  while  same-store  sales  fell  12 percent.

The  result  was  an  improvement  over  the  16  percent  same-store  sales  decline  in  the  last quarter  of  2014,  and  the  company  still  insists  it  plans  to  add  at  least  700  new  stores  in  China.

Analysts  said  customers  in  China  have  been  slow  to  forget  recent  food  scandals,  one  of which  involved  a  major  supplier  of  meat  to  fast-food  companies  including  McDonald’s  and Yum,  which  was  shut  down  for  allegedly  violating  numerous  safety  regulations,  including mixing  in  chicken  and  beef  parts  that  were  well  beyond  their  expiration  date.

Yum  has  launched  several  initiatives  to  attract  more  customers  in  China  including  a  high-end restaurant  Atto  Primo  in  Shanghai,  and  providing  quality  coffee  in  1,300  restaurants  across  10 cities.

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Ben  Cavender,  principal  of  the  Shanghai-based  China  Market  Research,  said  he  expected both  brands  to  continue  to  struggle  in  China  and  internationally.

“This  is  due  to  changing  consumer  tastes  and  an  overall  shift  toward  either  more  healthy foods  or  niche  brands,”  said  Cavender.

He  said  in  China  specifically  both  brands  continue  to  feel  the  effects  of  the  scandal,  and  a slowing  economy,  and  any  company  running  a  huge  number  of  stores  might  be  faced  with having  to  close  some.

“Coffee  sales  may  be  boosting  KFC  a  little  bit,”  he  said, “but  I  don’t  think  they  have  it  fully implemented  yet  and  they  also  have  a  lot  of  competition  in  that  space.”

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