Japan

Scandals prompt McDonald’s Japan to report first loss in over a decade

By RJ Whitehead

- Last updated on GMT

Scandals prompt McDonald’s Japan to report first loss in over a decade

Related tags: Japan, Food

A series of food safety incidents last year has taken its toll on McDonald’s Japan, with the company declaring its first net loss in 11 years.

McDonald’s Holdings declared a group net loss of JPY21.84bn (US$190m) in 2014—compared to a JPY5.14bn the year before. Revenue also tumbled from over JPY260bn to JPY222bn in the year—a drop of 14.6%.

The results for the last month have been particularly worrying for McDonald’s executives, with stores having seen sales plunge by 38.6% over January 2014. The drop came after a fragment of rubber and piece of vinyl were found by customers in the company's food products.

More trying, less frying

It has been a difficult six months for McDonald’s, beginning in July last year when one of its meat suppliers was found to be selling meat products that had already passed their expiry date.

The president of McDonald's Japan, Sarah Casanova, confirmed at a press conference that the company's monthly same-store sales have logged over 10 percent on-year declines every month since the meat scandal was revealed.

"I would like to sincerely apologise once again for all of the great anxiety and concern that the recent reports of food related foreign objects have caused our customers​," Casanova said.

"We serve billions of menu items every year and in the food industry we understand these kind of issues should never happen. It's our responsibility to do everything we can to obtain as close to zero as possible​," she told an earnings briefing.

Global challenges for fast-food chain

A month after the expired meat incident, a human tooth was reportedly found in a portion of french fries in Osaka, while soon after in Fukushima prefecture, a child was hurt after allegedly biting into a piece of hard plastic in a chocolate sundae. These events were compounded by a shortage of french fries due to dock issues in the US.

McDonald's Japan declined to announce its earnings outlook for this year while the cost of the food incidents are still being factored in, but Casanova pledged to regain customer confidence by ensuring such incidents will never happen again.

The results come after two years of worsening sales declines in its core US market—a situation that has so far not responded to executives’ attempts to halt the slump. The company recently replaced its chief executive with chief brand officer Steve Easterbrook following one of its worst financial years in decades.

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