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McDonald's Japan Moves Past Scandals With Delivery, New Burgers

Published on Aug 15 2017 12:02 PM in Restaurant tagged: Japan / McDonald's / Tokyo

McDonald's Japan Moves Past Scandals With Delivery, New Burgers

McDonald’s Japan has hit a growth stride after recovering from a series of food scandals and plans to boost profit further by expanding food delivery and adding new burgers to its menu.

The fast food chain operator on Wednesday raised its full-year profit outlook after reporting a 14 percent jump in sales for the second quarter. McDonald’s Japan will also invest in remodeling more restaurants and adding electronic payments to every store by the end of the year, Chief Executive Officer Sarah Casanova said at a briefing in Tokyo after the earnings release.

“We are now ready to accelerate the pace of our investments to make our business even stronger,” she said at a briefing in Tokyo after the earnings release.

Casanova’s turnaround, which included closing unprofitable stores, yielded 20 straight months of same-store sales gains. To keep the trend going, the chain is introducing its first new lineup of burgers in eight years and expanding its partnership with Uber Eats.

The fast food chain operator raised its full-year forecast for the second time this year, saying it expects full-year operating profit to be 16.5 billion yen ($150 million), up from a 15 billion yen previously. Revenue for 2017 will likely be 248.5 billion yen, compared with the 246 billion yen previously projected, the company said.

“They had lost the confidence of customers, but managed to appeal to them again,” said Seiichiro Samejima, a Tokyo-based analyst at Ichiyoshi Research Institute before the earnings release. The restaurant outlet is drawing in more customers with popular items such as Hawaiian “loco moco” burgers and advertising tie-ins including Pokemon-themed McFlurrys.

The outlook was much bleaker two years ago. The Japanese company’s stock took another hit when its Oak Brook, Illinois-based parent said in late 2015 that it was considering selling its stake. But as the company started to post profit gains, McDonald’s reversed itself.

Much of the turnaround in Japan has been orchestrated under Casanova, who took the helm of the company in 2014 after a previous stint as the head of marketing in Japan.

Although spending-per-customer fell in July due to discounts, McDonald’s Japan locations managed to attract enough of an increase in customers to make up for the decline, keeping alive the string of same-store sales gains.

Being more engaged with consumers, such as using social media to ask customers to name a burger or to vote on their favorite one, also helped with sales, Ichiyoshi Research’s Samejima said.

Shares of McDonald’s Japan rose 0.9 percent to close at 4,625 yen before the release of earnings on Wednesday. The stock reached the highest level since July 2001 on Aug. 3, and is up more than 50 percent for the year, far outstripping a 27 percent gain for McDonald’s Corp. The parent reached an all-time high last month. Japan’s benchmark Topix index has climbed less than 7 percent in 2017.

News by Bloomberg - edited by Hospitality Ireland

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