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Friday, 8 November, 2002, 22:43 GMT
Three countries to lose golden arches
New look McDonald's in Hinsdale, Illinois
McDonald's: Revising store formats to boost sales
The golden arches of McDonald's are to disappear from three countries in the Middle East and Latin America, as the fast-food chain struggles to beef up its performance.

McDonald's, which would not name the countries specifically, announced the retreat amid plans to axe 175 restaurants in 10 other countries.


I think they have problems across their operations

Ann Gurkin, analyst, Davenport & Co
Up to 600 jobs will also go, in the firm's third major round of lay-offs in three years.

The cuts come as McDonald's struggles to reverse a long-term profits decline, blamed on a poor performance in the US, weak economies in key markets such as Latin America, and the impact of outbreaks of mad cow disease in Japan and Europe.

US operations, which will swallow up to 250 of the latest job cuts, have seen like-for-like sales drop by 2.8% over the last year.

"Clearly they should have done this sooner, but it's better late than never," said Victory Capital Management analyst David Kolpak, whose firm holds 1.22 million McDonald's shares.

'Right thing'

The firm's chairman and chief executive, Jack Greenberg, said the cutbacks were the "right thing to do for McDonald's shareholders, the brand and our business".

"We remain focused on growing our existing restaurants' sales and we're committed to making the changes necessary to succeed in the challenging... environments in which we operate," Mr Greenberg added.

But the firm warned that the cost of the cuts programme would reduce pre-tax profits for the last three months of the year by $350m (222m; 347m euros) to $425m.

The company's shares closed down $1.52, or nearly 8%, at $17.79.

Growing competition

Friday's announcement comes only two weeks after McDonald's said it would cut new openings and focus on existing restaurants.

The firm currently boasts 30,000 outlets worldwide, 13,300 in the US.

But it faces increasing competition from rivals such as Wendy's and Burger King, and has introduced price cuts and new restaurant formats in an effort to boost market share.

"They need to work on underperforming restaurants," said Ann Gurkin, analyst at Davenport & Co.

"They need to work on menus still. They need to work on management.

"I think they have problems across their operations."

See also:

07 Nov 02 | Business
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19 Apr 02 | Business
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