McDonald’s Corporation has informed the US Securities and Exchange Commission that it will face approximately US$60m in pre-tax charges in the first quarter due to a Brazilian acquisition and costs associated with the closure of 25 UK restaurants.
In the filing, McDonald’s said that it plans to close the 25 outlets in the first quarter and expects costs of $40m for lease cancellations and other charges.
The closures have attracted speculation that the corporation is cutting back UK operations, as the news is hot on the heels of a statement earlier this month by Denis Hennequin, the head of McDonald’s Europe, that the UK represents the biggest European challenge for the fastfood giant.
Amanda Pierce, a spokesperson for McDonald’s UK, told just-food that the move was indeed part of McDonald’s reform of the high street, designed to reinvigorate sales in the UK. However, she stressed that the closures were “nothing new”.
“We have been conducting a strategic reform of the high street. This comes in two parts: restaurant refurbishment and making sure we have restaurants in the right places.
“We have been in the UK for 35 years and some of our older restaurants may not be in prime locations,” she continued. “In common with other retailers we open, close and relocate restaurants as customer trends change to ensure that they are in the best possible locations.”
The fastfood giant also expects to incur pre-tax costs of $20m for the acquisition of restaurants “operated by several litigating franchisees” in Brazil, the filing revealed.
On the other side of the ledger, the company said that it sold 3m Chipotle shares, generating proceeds of $61m and pre-tax non-operating profit of about $50m in the first quarter.
In the filing, McDonald’s reiterated its long-term goals of annual system-wide sales revenue growth of 3% to 5%, operating income growth of between 6% and 7% and “annual returns on incremental invested capital in the high teens”, excluding the impact of foreign exchange transactions.