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Business

McDonald's Japan faces make-or-break summer after return to black

July-August push looms large as CEO Casanova targets growth

Summer sales will play a key role for McDonald's Japan this year.

TOKYO -- McDonald's Holdings (Japan) is stepping up hiring to prepare for a crucial summer, facing low customer traffic even as sales recover and the fast-food purveyor returns to profitability after years marked by food quality woes.

Having posted its first net profit in three years, McDonald's Japan will now target growth, President Sarah Casanova told shareholders Friday. The meeting was shorter and drew fewer attendees than previous gatherings, which were marked by negativity. But many shareholders took a more optimistic view this time, noting that earnings had certainly recovered, despite their reservations last year.

Average sales per existing store for the October-December quarter surpassed those of the same period in 2013, before the expired-meat and other food quality issues. The company booked a 5.3 billion yen ($47.7 million) net profit for the year ended Dec. 31.

McDonald's Japan put great effort into making this happen. Roughly 1,000 locations -- a third of the total in Japan -- underwent large-scale renovations in 2015 and 2016. The company also rearranged counters to include separate order and pickup sections, speeding up service.

The fast-food purveyor also drew eyes by investing in new products at twice its usual rate, as well as through a tie-up with the hit "Pokemon Go" smartphone app.

McDonald's Japan enjoyed a more upbeat general shareholders meeting this year.

McDonald's Japan made a strong start in January and February and will grow to accompany its profit in 2017, Casanova said.

While sales figures suggest that the scars from past years' food scandals have faded, customers are still coming in less. Pricey new offerings have lifted sales revenue, but some franchises serve only around nine-tenths as many people as they did before the troubles began.

Per-store sales have recovered, but fewer stores now exist. McDonald's had 3,800 Japanese locations back in 2001. But now, following shutdowns of many unprofitable stores, the tally comes in below 3,000. Chainwide sales reached 438 billion yen in 2016, roughly 80% of peak levels.

But the company needs to bring in more customers during the critical period of July and August, when earnings heavily affect the year overall. It needs to take on part-time workers this spring to prepare and has embarked on a hiring offensive.

The fast-food seller drew thousands of candidate workers through a work experience program at stores nationwide March 15. More than 2,000 locations have also reached out to local schools and employment offices, hoping to receive more applicants.

McDonald's Japan is working hard on retention as well. It will invest 2 billion yen in upgrading employee education and information systems, aiming to shorten part-timers' training and smooth the sales promotion process. The improvements will be rolled out on a trial basis starting this fall.

Casanova said she is not yet satisfied with her effort to right the chain she inherited from predecessor Eiko Harada. The quality issues surfaced shortly after Casanova took the helm at the holding company in March 2014, and sales have finally recovered to the starting point. Where she will find room for growth in a maturing Japanese market remains to be seen.

(Nikkei)

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