Albany, New York (10/07/2014) – McDonald’s Corporation (NYSE:MCD) in Japan forecasted a net loss of 17 billion yen for the year 2014, its loss for the first time in 11 years. The loss was reported due to a food safety scandal which hit the sales already down by intense competition. The announcement brought further despair for Mc Donald’s Corporation, which has 49.9% share of McDonald’s Japan and has been struggling with falling sales globally. According to Sarah Casanova, Chief Executive of McDonald’s Japan, he takes the responsibility for the poor food quality and the lack of confidence expressed by customers.
McDonald’s Japan had been suffering from weak demand
Facing the severe competition from local convenience stores, McDonald’s Japan had already been suffering from weak demand even prior to the food safety scare. A major Chinese chicken supplier was found to be breaking the safety standards. Before the food safety scare, McDonald’s Corporation (NYSE:MCD) had forecasted 11.7 billion yen of operating profit and 6 billion yen of net profit for the year. Last year, McDonald’s Japan recorded a dip of 60% in net profit to 5.14 billion yen.
The food scare also affected other food companies worldwide like Yum! Brands Inc. (NYSE:YUM). The drop in sales of McDonald’s Japan was 25% in August due to the food scare. This was the sharpest decline in sales of McDonald’s Corporation (NYSE:MCD) since it went public in 2001. There was a further decline in sales of 16.6% in September for the eighth straight month of year-on-year falls.
McDonald’s Japan shares closed 2.5% lower at 2,638 yen, inverting the previous gains and lagging a 0.7% decline in the Nikkei benchmark index. McDonald’s Corporation (NYSE:MCD)’s Corp declared last month that the sales dropped worldwide by 3.7% in August. Due to internal missteps, shifting consumer tastes and competition, McDonald’s Corporation (NYSE:MCD) had warned in earlier that its profits would be hit due to food safety scandal.