MCDONALD'S REPORTS 5TH CONSECUTIVE EARNINGS DROP

'2001 Was Difficult' Executives Tell Analysts

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CHICAGO (AdAge.com) -- Even as they reported the company's fifth consecutive quarterly earnings drop Thursday, McDonald's Corp. executives expressed optimism for the coming year.

Net income fell a record 40% to $272 million, or 21 cents per diluted share, for the quarter ended Dec. 31 from $452 million, or 34 cents per diluted share, from the same period in 2000. Total net income for the year fell 17% to $1.6 billion, or 1.25 per diluted share, from $1.9 billion, or $1.46 per diluted share, for the world's largest hamburger chain.

"2001 was difficult," admitted McDonald's Chairman-CEO Jack Greenberg in a prepared statement. But he went on to say the hamburger giant was "entering 2002 with a sense of optimism, purpose and confidence in our strategies."

Making adjustments
During Thursday's

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analyst conference call, McDonald's executives said they were making some adjustments in the restaurant's menu offerings and promotion strategies. The first round of marketing activities for 2002 begins with an Olympic-themed effort from Omnicom Group's DDB Worldwide, Chicago, that will break during the Games.

During the conference call, executives noted that systemwide sales grew 2% to $10.1 billion for the fourth quarter 2001 ended Dec. 31 and 1% to $40.6 billion for the year, due primarily to expansion of 1,386 stores around the world.

Corporate overhaul
The company posted $252.1 million in special charges during the quarter, including a $200 million pre-tax write-down to cover a corporate overhaul that eliminated 500 to 700 headquarters and field office jobs.

The latest executive shift from that restructuring happened on Jan. 21, when Alan Feldman, president and chief operating officer, resigned.

Games scandal losses
Other charges included $25 million for unrecoverable costs related to the Simon Marketing games scandal, $20 million for the sale of McDonald's interests in Aroma Cafe, and $7.1 million related to closing nine underperforming restaurants.

Executives declined to comment specifically on the pending lawsuit with Simon Marketing.

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