Investor Release EXHIBIT 99.2
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
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11/08/02 Investors: Mary Healy, 630-623-6429
Media: Anna Rozenich, 630-623-7316
McDONALD'S ANNOUNCES ADDITIONAL PLANS TO OPTIMIZE
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ITS EXISTING BUSINESS; REPORTS OCTOBER SALES
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OAK BROOK, IL - McDonald's Corporation announced today additional actions it
plans to take to optimize its existing business. These actions are consistent
with the plans the Company began outlining last month to emphasize sales growth
at existing restaurants. In addition, the Company reported October sales.
.. Restructuring four countries and closing three countries.
.. Closing approximately 175 underperforming restaurants in about 10 other
countries.
.. Eliminating 400-600 positions to control costs and reallocate
resources.
.. Systemwide sales totaled $3.5 billion for October and $34.5 billion for the
first ten months of 2002, up 3% and 2%, respectively in constant currencies.
McDonald's expects these actions will reduce its fourth quarter 2002 pretax
income by about $350-$425 million, most of which will be non-cash. The
restructuring and closing of countries, together with the closing of
underperforming restaurants, will comprise the vast majority of this amount.
Chairman and CEO Jack Greenberg said, "These actions are the right things
to do for McDonald's shareholders, the brand and our business. We remain focused
on growing our existing restaurants' sales and we're committed to making the
changes necessary to succeed in the challenging worldwide economic and
competitive environments in which we operate. Our brand presence will remain
strong, with more than 30,000 restaurants around the world.
"Sales improved in October compared with third quarter trends, particularly
in the United States where our recent service and value efforts are clearly
affecting the competition. However, we were targeting stronger results for the
month as well as the entire fourth quarter. Given the charges described above
and recent sales performance, we will not achieve our previously announced 2002
earnings per share target. Yet, I believe the decisions we've made over the past
month will better enable us to focus on our existing assets, grow cash from
operations and improve returns for shareholders. As a result, I remain very
confident in our strategies, our brand, and our future prospects."
Restructuring Ownership in Four Countries and Closing Three Countries
McDonald's plans to restructure four international markets by transferring
ownership to developmental licensees. Under the developmental license business
structure, which McDonald's successfully employs in more than 25 markets around
the world, the licensees will own the business, including the real estate
interest. While the Company will no longer have any capital invested in the four
restructured markets, it will receive a royalty based on a percentage of sales.
McDonald's also plans to close operations in three small markets outside the
U.S. These decisions were driven by the assessment that returns in these
countries will continue to be below acceptable thresholds for the Company.
Collectively, McDonald's operates 200 restaurants in these seven countries in
the Middle East and Latin America.
Underperforming Restaurant Closings
In an effort to further concentrate its efforts on assets that have the
greatest potential, the Company has conducted a preliminary review of
underperforming restaurants and expects to close about 175 units in the fourth
quarter, over and above the usual number of closings that occur because of
relocations, lease expirations, etc. These additional closings are concentrated
in 10 countries.
Job Eliminations
To better control costs and reallocate resources, the Company expects
to eliminate about 400-600 job positions, 200-250 of which are based in the U.S.
The actual number of people affected will be less, as these reductions will be
achieved in part through attrition and the elimination of open positions. The
G&A savings from this action will support our continuing goal of limiting G&A
growth to less than half the growth rate of Systemwide sales, including higher
spending on strategic technology in 2003.
Sales Update
Systemwide sales totaled $3.5 billion for October 2002 and $34.5 billion
for the first ten months of 2002, constant currency increases of 3% and 2%,
respectively, compared with the same periods of 2001./(1)/ Comparable sales for
Brand McDonald's for both periods were as follows:
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Brand McDonald's Comparable Sales/(2)/ Increase/(Decrease)
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Month ended Ten months ended
October 31,2002 October 31, 2002
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U.S. (0.6)% (1.5)%
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Europe (2.2) 1.6
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APMEA (4.5) (8.8)
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Latin America 7.5 (1.3)
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Canada (1.3) (2.0)
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Brand McDonald's (1.3) (2.0)
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(1) Information in constant currencies excludes the effect of foreign currency
translation on reported results, except for hyperinflationary economies,
whose functional currency is the U.S. Dollar. Constant currency results
are calculated by translating the current year results at prior year
monthly average exchange rates.
(2) Comparable sales represent the percent change in constant currency sales
from the same period in the prior year for restaurants in operation at
least thirteen months.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this release. They use such
words as "may," "will," "expect," "believe," "plan" and other similar
terminology. These statements reflect management's current expectations
regarding future events and operating performance and speak only as of the date
of this release. These forward-looking statements involve a number of risks and
uncertainties. The following are some of the factors that could cause actual
results to differ materially from those expressed in or underlying our
forward-looking statements: the effectiveness of operating and technology
initiatives and advertising and promotional efforts, as well as changes in:
global and local business and economic conditions; currency exchange and
interest rates; food, labor and other operating costs; political or economic
instability in local markets; competition; consumer preferences, spending
patterns and demographic trends; legislation and governmental regulation; and
accounting policies and practices. The foregoing list of important factors is
not exclusive.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.