McDonaldfs Holdings Japan
close
October 7, 2014
Revision of Consolidated Financial Forecast and Recording of Extraordinary Loss for Fiscal Year 2014
 McDonaldfs Holdings (Japan), Ltd hereby revises the full-year consolidated financial forecast for fiscal year 2014 (January 1, 2014 through December 31, 2014), which were withdrawn on July 29, 2014. The company also reports to record extraordinary losses as outlined below for the same period.
1. Fiscal Year 2014 Revision of Full-year Forecast (January 1, 2014 - December 31, 2014)
Revenue Operating
income
Ordinary
income
Net
income
Earnings
per share
Previous forecast(A) Millions yen
-
Millions yen
-
Millions yen
-
Millions yen
-
Yen
-
Latest forecast (B) 221,000 ¢9,400 ¢10,700 ¢17,000 ¢127.86
Difference (B-A) - - - - -
Difference (%) - - - - -
(Note) FY2013 Results 260,441 11,524 10,236 5,138 38.64
(Note) FY2014 forecast at the beginning of year 250,000 11,700 10,700 6,000 45.13
ƒReasons for revision„
 The company withdrew its original earning guidance due to the uncertainty of sales and profits affected by the Shanghai HUSI incident. However, we have decided today to re-set our 2014 earnings guidance based on currently available information and estimations.
 The companyfs financials have been/will be largely affected by the Shanghai HUSI incident. It is probable that sales for this year will be far lower than expected at the beginning of the year. This will significantly affect our overall profitability, due to the profit impact from the sales decline, costs impacts either directly or indirectly resulting from the incident as well as our strategic investments to recover from the incident by regaining customer confidence in our food. Furthermore, we expect to see large extraordinary losses from write-offs of unsold food products and impairment charges on our restaurants stemming from the incident, resulting in the large net losses for the year. Attached below is the schedule of the resulting financial impact.
ƒImpact on Sales and profit by Shanghai HUSI incident„
Millions yen
All store sales
decrease
Ordinary Income
Decrease
Impact related to sales decrease 45,000 11,600
Millions yen
Ordinary Income
Decrease
Extraordinary
Loss
Total
Financial support for franchisees 3,200 - 3,200
Quality management enhancement and Improved transparency 2,400 300 2,700
Aggressive staffing 700 - 700
Write-off of unsold food material 300 2,750 3,050
Others 700 50 750
Total 7,300 3,100 10,400
 The financial impact above includes strategic investments aimed at achieving the earliest possible recovery, in addition to the losses due to the incident. Specifically, investments made are in the form of support to franchisees and our corporately-owned restaurants to continue to deliver customers a great restaurant experience and in implementing new Quality Management Enhancements and Improved Transparency communications to regain our customersf trust in our food safety. Please refer attached documents, gSummary of gPress conference on FY 2014 Annual Earnings Forecasth (excerpts)h.
2. Recording of Extraordinary Loss
 The company expects the following extraordinary losses for this year stemming from the Shanghai HUSI incident. The impairment loss will be recognized for some restaurants considering recoverability of assets based on the recent sales and profit trend after the Shanghai HUSI incident.
Millions yen
Amount
Impairment loss 6,200
Write-off of unsold food material 3,100
Total 9,300
(Note) The forecasts shown above are predicted upon information that is available as of the day of the announcement of this report. Actual financial performance, therefore, may differ considerably from these forecasts due to a variety of factors hereafter.
yReferencezSummary of gPress conference on FY 2014 Annual Earnings Forecasth (excerpts)
The following is a summary (excerpts) of our corporate business plan presented by Sarah L. Casanova, our representative director, president and CEO, in addition to the explanation of our FY2014 earnings forecast at a press conference on the forecast held on October 7, 2014.
ƒOur future priorities (Create More Customer Value - Sharpen Our Focus)„
Our company has built its business plan under the concept of gCustomers Fristh and I have listened to many customersf voices to develop our planc What I have heard, and continue to hear from our customers today is that…
gMcDonaldfs has gotten expensive and our pricing is not easy to understandh
gOur menu offerings are not as compelling as they used to beh
gOur restaurants are getting older and outdatedh
Itfs obvious that we need to take action on pricing, menu innovation and restaurant development to create more customer value at McDonaldfs, and we need to accomplish progress on them faster. So as we began to assess our plan in May, we decided to sharpen our focus to more quickly deliver on these foundational customer needs. We will sharpen our focus on the three key areas to do these things better and meet customersf basic needs.
¡ Pricing
To ensure customers feel more value for money, we will launch the new Value Lunch program, easy to understand pricing, coupon strategies more focused on loyal customers, etc.
▶ Launch of Value Lunch
We will launch Value Lunch on Wednesday, October 8 which will offer 10 different EVMfs for \350, \450 and \550 to offer greater value.
▶ Total pricing portfolio review
We also have started a full pricing review to assess our offeringfs relevance with customers. Our goal is to offer more customer value, implement consistent pricing structures and easy to understand pricing displays.
▶ Coupon strategy changes
Wefll also make changes to our couponing strategy. We want our loyal customers to feel more valued, while at the same time ensuring our regular pricing has better integrity.
¡ Menu innovation
And to meet customersf expectations also in menu development, we must make bold and innovative moves with menu development.
▶ New Japan regular menu - Tonkatsu McBurger
We will launch Tonkatsu McBurger as a new exclusive perfected-for-Japan item on our regular menu in late October. Whatfs unique and the first of its kind is that we invited some of our customers to develop a new sauce for this very special offering.
▶ Supplier collaboration
Our suppliers are also working collaboratively, leveraging their global and domestic expertise, to proactively bring new food ideas and creative creations to McDonaldfs.
▶ More options for children
We aim to enhance our childrenfs menu with more balanced options for our youngest customers.
¡ Restaurant investment
We had focused on building what we call Gold Standard Drive Through restaurants and strategically closing others, but this has still left us with many that are older and outdated. We will focus more on rebuilding, remodeling and refreshing of existing restaurants to provide a gmore comfortable eating experienceh to customers.
▶ Clear focus on improving existing restaurants
By making fundamental changes in our investment strategy and accelerating our progress, we will modernize these restaurants by rebuilding, remodeling and refreshing them in the next four years. Currently only approximately 25 percent of our restaurants can be considered modern, but we plan to increase that number to 85 to 90 percent in 2018.
▶ One-size-fits-all to locally relevant format
We will to take a new approach to restaurant development from one-size-fits-all model to a local market, relevant design format to build restaurants which meet customersf real needs.
close