McDonald's £209m loss hits expansion
McDonald's last week recorded its first quarterly loss since going public in 1965, an announcement which looks certain to mark the end of one of the biggest corporate global expansion programmes of modern times.
Although the chain's executives have tried to convince the markets that McDonald's should still be an expanding chain, analysts do not agree.
The company has announced it is closing more than 700 loss-making restaurants, but it's also planning new ones, including 44 in the UK this year. It was a one-off charge of $810m (£494m) relating to the closures that pushed the company into a loss of $343m (£209m) in the last quarter of last year, against a $271m (£165m) profit in the same quarter last year.
Tim Ghriskey, of American-based Ghriskey Capital Holdings, said McDonald's now needed to stop expanding. "What it needs to do now is consolidate and make more money out of the sites it has got. The closures mean they have taken a step in the right direction, but many market-watchers still think their new unit plan is too aggressive."
McDonald's share price has been under pressure for some time. It was trading at $14.77 (£9) earlier this week, well under a third of its peak price of $49.56 (£30.25) in November 1999.
The relatively cheap price of the shares is one reason why investors like Ghriskey think the stock is now a good buy, but they are applying pressure on McDonald's to press ahead with its closure programme.
Ghriskey said: "In many ways McDonald's is just a huge real estate company. There are clear opportunities for some of their sites to be converted to alternative concepts."
McDonald's has diversified significantly in the last two years. It has a 33% stake in sandwich chain Pret A Manger and has been experimenting with old-fashioned diner restaurants serving meatloaf and mashed potato. It also owns the Donatos pizza chain.
Some observers believe the loss at McDonald's heralds the end of the golden era for fast food. But the recent results are largely because McDonald's has now saturated its market.
The expansion of chains such as Nando's and Wagamama demonstrate that consumers still have an appetite for fast food, but increasingly sophisticated taste, worries about health, and environmental concerns about the large fast-food chains are beginning to influence where they eat.
by David Harris
Where does McDonald's earn its money?
Annual worldwide sales: $41.5b (£25b)
USA: 35%
Europe: 35%
Asia, Pacific and Middle East: 15%
Latin America: 5%
Canada: 4%
Other brands: 6%
