| April 16, 2015 |
Earnings Forecast for Fiscal Year Ending December 31, 2015
and Business Revitalization Plan |
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| McDonald’s Holdings Company (Japan), Ltd. hereby announces its consolidated earnings forecast for the fiscal year ending December 31, 2015 (from January 1, 2015 to December 31, 2015), which was left as ‘TBA’ at the financial results announcement on February 5, 2015, and the Business Revitalization Plan for mid- to long-term growth. |
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| 1. Consolidated Financial Forecast for FY2015 (from January 1, 2015 to December 31, 2015) |
| (In Millions of Yen) |
| |
FY2014 |
FY2015 |
| Actual |
Forecast |
vs. Last Year |
| System-wide Sales* |
446,307 |
382,000 |
-64,307 |
-14.4% |
| Consolidated Sales |
222,319 |
200,000 |
-22,319 |
-10.0% |
| Consolidated Operating Income |
-6,714 |
-25,000 |
-18,285 |
- |
| Consolidated Ordinary Income |
-7,974 |
-31,000 |
-23,025 |
- |
| Consolidated Net Income |
-21,843 |
-38,000 |
-16,156 |
- |
|
| *System-wide Sales: combined sales of company-operated and franchised restaurants. |
 |
| We expect our system-wide sales and consolidated sales in FY2015 will down by 14.4% and 10.0% respectively impacted by a continuously challenging business environment. Also, ordinary income is assumed decreasing to negative 31 billion yen impacted by the sales decrease and an increase in non-recurring spend. As for net income, we expect a net loss of 38 billion yen reflecting the ordinary loss and the impact of impairment loss of 4.9 billion yen. |
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| 2. Business Revitalization Plan |
| Food safety and quality will remain to be our number one priority; we will continue to strive to regain trust of our customers and stakeholders. Business Revitalization Plan supported by four pillars is formulated to build foundation for business recovery and future growth. Through execution of the Business Revitalization Plan, we aim to bring our customers visible points of change and become a Modern Burger Restaurant that Connects with Customers. |
|
| ■Customer Focused Initiatives |
| We strive to bring more comfortable dining experience for our customers. Some immediate initiatives currently under trial and to be announced in the very near future include |
✧ New set menu that provide more customized choice and wider variety for our customers.
✧ We are developing new Happy Meal options
✧ A new personalized digital loyalty program with relevant coupons
✧ A mobile app which gathers real-time feedback from our customers |
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| ■Accelerate Restaurant Revitalization |
| We will further accelerate remodeling of existing restaurants to provide more modern, clean, inviting restaurants environment for our customers to enjoy their meals. Presently, only 25% of our restaurants fit our vision of a Modern Burger Restaurant; we plan to remodel approximately 2000 restaurants aiming to have 90% of our restaurants upgraded to modern within four years. In 2015, we are targeting to remodel approximately 500 restaurants located in food courts or shopping malls. In addition, we will close 131 underperforming restaurants this year that have no long-term growth potential, and will reallocate resources resulting from the strategic closures to invest in remodeling restaurants with greater growth potential. |
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| ■Localize Our Business Structure |
| Broad-scale national strategies, such as national marketing, menu development and operation system development, are defined as “Big M”, whereas the activities rooted in restaurants and/or local communities are defined as “Little M”. We will strengthen “Little M” activities and operate our business in a manner more rooted in local communities and restaurants. |
| ✧ Regional Headquarters |
- In order to realize management from a position that is closer to our customers, we will introduce Regional Headquarters. We will reorganize McDonald’s Japan into three regions. Each region will have business functions such as Marketing, HR and Finance, and have full business execution responsibility for their region, which will enable each region to reduce the layers within organization and to implement activities rooted in the local community and customers. Also, we will further strengthen Marketing activities to meet the demands of the local communities and customers.
|
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| ■Improve Cost and Resource Efficiency |
| To concentrate our resources into investments for long-term business growth, we will effectively allocate our resources such as people and capital, and drastically transform our cost structure. |
| ✧ Optimize our Resources |
- ▶ Accelerate Restaurant Revitalization
- New restaurant development will be very carefully selected and we are shifting our resource from new store openings to remodeling existing stores. We will prioritize remodeling of existing restaurants rather than new opening to offer great restaurant experiences and bring our customers visible points of change.
On the other hand, we will secure capital for investment through strategic closures. Strategic closures are expected to incur non-recurring cost of approximately 4 billion yen and improvement in profitability of about 2.4 billion yen (annualized).
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- ▶ Reengineer our costs structure
- To maximize the effect of the regional HQ structure, we will review and reprioritize the HQ functions and operations and will put the right people into the right jobs. This involves the offering of voluntary early retirement packages to approximately 100 permanent positions in our Tokyo HQ and the field.
We have identified more than 12 billion yen in cost saving potentials across Food & Paper, Logistics and Labor and we will promote cost optimization.
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- ✧ Financial support to franchise owners
- We will continue to provide financial support to franchise owners this year to offer continuous great restaurant experiences to all of our customers.
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- ✧ Borrowing facilities
- To secure capital required to execute our Business Revitalization Plan, we have increased borrowing facilities and borrowed 22 billion yen.
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| We accept responsibility for recent results and the disappointing forecast; so to reflect this, we have decided to reduce remuneration of our Representative Director and President by 20%, our Representative Director by 15% and by 10% for Board members who are still with the company and were on the Board in 2014 for 6 months. |
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| We expect to post a huge loss for FY2015 impacted by non-recurring one-time cost and investments associated with the above-mentioned Business Revitalization Plan. However, by executing this Business Revitalization Plan, we expect to return to profitability in FY2016. |
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| (Note) The forecasts shown above are prepared based on the information that is currently available to the Company. Actual financial results, therefore, may differ from these forecasts due to a variety of factors. |
| EOD |
