Milling & Baking News - February 3, 2004 - 25

N E W S F E AT U R E

customers to visit the chain more often and to reduce new restaurant openings, which con- expects U.S. comp sales growth to total just
resume proﬁtable growth.
sistently averaged 1,000 to 2,000 per year in 1% to 2% for all of 2004, though he expects
Long-term, the plan eyed yearly system- the late 1990s through 2001. In 2003, the com- monthly comps in the ﬁrst half of the year to
wide sales growth of 3% to 5% and operating pany opened 823 new restaurants; it said last rise 5% to 10%.
income growth of 6% to 7%. To achieve it, week it would open about 850 in 2004.
Ms. Gurkin sees U.S. comps rising 3% to
Mr. Cantalupo outlined three key strategies:
In December, McDonald's also revealed 4% in 2004, even with the recent discovery
improving restaurant operations by "right- it would sell its 200-unit Donato's Pizza of mad cow disease in a single cow in the
ing the ship," revitalizing the McDonald's division, exit its joint venture with Fazoli's Paciﬁc Northwest.
brand by expanding its relevance to a restaurants and curtail expansion of its
The company maintains that news has
broader customer group, and cutting capital Chipotle Grill and Boston Market concepts not hampered sales in the U.S. as it did
spending, with money remaining after capital outside the U.S.
three years ago in Europe. If anything, Ms.
expenses earmarked for debt reduction and
"It's very much a positive that they're scal- Gurkin suspects it could produce a silver
dividend payments to shareholders.
ing back all these alternative concepts to get lining as cattle prices descend from recent
With Mr. Alvarez aboard, operational efforts the basic business ﬁxed," Ms. Gurkin said.
record highs.
soon started paying their own dividends. U.S.
Obstacles remain, though. The company's
"The beneﬁts of lower beef costs should
comp sales growth ﬁnally resumed, reaching international sales continue growing at a slug- have an overall positive impact on (2004)
a fever pitch in the second half of the year. The gish rate, and franchisees in Latin America numbers," she said.
chain capped 2003 with a 12.2% increase in have complained that management's focus
But Supermarketguru.com's Mr. Lempert,
U.S. comp sales during
who said he's "shocked"
December, the ninth
that the discovery of mad
straight month in which
cow in the U.S. hasn't afU.S. comps increased.
fected McDonald's sales,
In the meantime,
added that even after the
Mr. Cantalupo kept his
company's 2003 success,
word, slashing capital
2004 brings a new set of
expenses to about
challenges.
$1.3 billion, the lowest
"Just because they've
level in 10 years and
been able to bring back
a 35% decrease from
some of their core con2002. McDonald's said
sumers doesn't mean they
last week that capital
can attract new customers,
spending would rise
and that's going to be key,"
just $200 million to
he said. "What we've seen
$300 million in 2004.
in 2003 is a turnaround.
Analysts certainly acThat's great, but in the
knowledge the impact
long-term, can they attract
that a recovering U.S.
new customers?
economy has had on
"The next year has to
the chain's results in
(include) a turnaround inrecent months. Indeed,
ternationally and growth
the strongest comp
in the U.S."
sales growth began in
Mr. Glass, though, said
the third quarter, when
that because "everyone
the nation's gross dohas been a customer of
mestic product grew at Share price of McDonald's surged 54% in 2003, regaining some of the ground lost in McDonald's at one time
a blistering 8.2% pace, a three-year slide.
or another," stimulating
the highest quarterly
increased frequency of
rate since the ﬁrst quarter of 1984.
on U.S. operations has hurt their sales. Ed customer visits should remain the chain's
But analysts also point to the impact of Sanchez, head of the company's Latin biggest focus.
Mr. Cantalupo, who began his stint with American operations, resigned late last year;
the company 30 years ago as a ﬁnancial McDonald's replaced him with Jose Armario, Monitoring the menu
McDonald's succeeded in bringing back
controller.
previously a senior vice-president in that
customers in 2003 - particularly parents
"He seems to be very direct in his ap- same division.
proach," said Ann Gurkin, an industry analyst
In addition, the company likely won't see who had stopped eating the chain's food
with Davenport & Co., "and he seems to the same degree of sales success this year in even as they bought Happy Meals for their
children - with the addition of three prehave an agenda that he is following."
the U.S. that it did in 2003.
Part of that agenda consisted of narrowing
Mr. Glass, who predicts the company's mium salad lines.
In addition, the company's successful new
the company's focus. It included plans to 2004 per-share earnings (excluding unusual
close about 600 restaurants and signiﬁcantly items) will rise 9% to $1.56 per share, said he McGriddles breakfast sandwich afﬁrmed that

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