Jack Greenberg, chairman and CEO of the fastfood behemoth McDonald’s, has said that the company expects Q2 earnings per share to be US$0.38 to US$0.39, compared with US$0.34 in 2001.
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“For the year,” he added: “We expect annual earnings per share to be in the range of US$1.47 to US$1.52, excluding charges in the Q1.”
These Q1 charges include US$43m, pre and after tax, primarily related to the impairment of assets in Latin America and the closing of underperforming restaurants in Turkey, as a result of continued economic weakness. There was also a Q1 2002 non-cash charge of US$99m after tax for the cumulative effect of adopting SFAS 142, “Goodwill and Other Intangible Assets”.
“Including the charges,” explained Greenberg, “we expect annual earnings per share to be US$1.36 to US$1.41. These expectations reflect a foreign currency translation impact of neutral to up 1 cent for the Q2 and neutral to up 2 cents for the FY.”
McDonald’s systemwide sales for the first two months of Q2 2002 were US$6.9bn, up 1% in constant currencies over the same period last year. Through year-to-date May, systemwide sales were US$16.6bn, up 3% in constant currencies over the same period last year. “We expect constant currency systemwide sales to increase in mid-single digits for the year,” Greenberg added.
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By GlobalDataGreenberg added: “Our European business is performing well. In constant currencies, European sales increased 9% for the first two months of the Q2 and 10% through year-to-date May, compared with the same periods last year. We are pleased with the progress in Europe and expect its constant currency sales and operating income to increase in high-single digits in the Q2. For the year, Europe’s constant currency sales are expected to increase in high-single digits while its constant currency operating income is expected to increase in high-single to low-double digits (excluding special charges of US$45.8m in 2001, relating to the closing of underperforming restaurants and global change initiatives).
“In the US, sales grew 1% for the first two months of the Q2 and 2% through year-to-date May. For the Q2 and for the FY, we expect US sales to increase in low-single digits and US operating income to increase in mid-single digits. The annual guidance includes US$22m of payments to owner/operators in the Q1 2002 to facilitate a new front counter team service system and excludes special charges of US$181m in the Q4 2001, relating to US business reorganisation and costs incurred in connection with the theft of promotional game pieces and related termination of a supplier.
“Sales in our Asia/Pacific/Middle East/Africa segment (APMEA) continue to be affected by weak economies in several markets. In addition, in Japan, general food safety concerns continue to impact sales, even though McDonald’s Japan only uses beef from Australia and New Zealand. APMEA’s constant currency sales declined 7% for the first two months of the Q2 and 4% through year-to-date May. In the H2 of the year, we expect improvement in this segment as we face easier comparisons.”
Constant currency sales in Latin America were relatively flat for the first two months of the quarter and through year-to-date May, as the segment continues to be affected by weak economies. Constant currency sales in Canada increased 2% Q2-to-date and 1% year-to-date May. Partner Brands’ sales increased 10% Q2-to-date and 12% year-to-date May.
