McDonald’s (NYSE:MCD) has its hands full with the Japanese Division


The month of October may change the face of McDonald’s (NYSE:MCD). With the company’s 49.9% stake in its Japanese division going down the drain as a net loss in 2014 of nearly 17 billion yen amounting to $156.7 million projection may be coming its way. With the loss in market share at McDonald’s holdings (TYO: 2702), the company has a bitter pill to swallow.

This is the first time in nearly 11 years that the hamburger chain won’t be profitable. The thing that’s concerning the company and has investors’ dead in their tracks is the amount of the loss. The division generated a 5.17 billion yen profit just last year and even with the supplier scandal this July, the company still predicted profits of 6 billion yen.

This turn of events has got the company in a panic with McDonald’s CEO holdings (TYO: 2702), Sarah Casanova stating how customers are lacking confidence in the company’s quality of food. When the news of Shanghai Husi broke out, McDonald’s (TYO: 2702) immediately pulled away from the supplier making it clear to the public that it valued its food quality.

Yet, the company isn’t gaining much love from its customers right now. Not only is McDonald’s (NYSE:MCD) not getting a run for its money but Yum! Brands (NYSE:YUM) also reported its earnings on the 7th of October making it clear that the China division for KFC and Pizza Hut didn’t report outstanding same restaurant sales either. They were relatively lower than previous years.

The brand’s Taco Bell subsidiary showed an increase of domestic comps by 3% probably due to the high-profile activity it carried out in promotions. In reality those comps actually increased due to a soaring 6% in its breakfast menu sales that it recently launched along with pricing activity. This goes to show you that the lunch and dinner offerings of the company aren’t going too well compared to the breakfast stake.

Restaurants are paying close attention to breakfast variety nowadays. Technomic researchers have predicted that McDonald’s (NYSE:MCD) owns around 31% of the market share in daypart area thus generating 20% of the worldwide revenue. This is probably because of the McCafe Coffee that it is offering which the company gave out for free for a few instances in order to get customers through the door.

In April, McDonald’s (NYSE:MCD) adopted the giveaway program after rivals aimed the breakfast menu to the market. This allowed the company to state flat comps in the month which was the first time it reported this since October of last year. However, with sales resuming to where they were, the company experienced a downfall yet again. With the results of Taco Bell in mind, the coffee move wouldn’t be wise at this point.

McDonald’s (NYSE:MCD) is set to report its earnings on the 21st of October. Investors may be hit hard as this Halloween may turn out to be a horrible one for the company with its performance in the Asia-Pacific and rivals at home eating away their breakfast market share.