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McDonald's Japan fears 'Pokemon Go' boost wearing off

Year-old mobile megahit still luring monster hunters into stores

Turning fast-food restaurants into PokeStops did wonders for McDonald's bottom line in Japan.

TOKYO -- A year after "Pokemon Go" debuted in Japan, the smartphone game and social phenomenon continues to entrance millions while helping businesses by sending traffic their way. But this boom cannot last forever.

Out and about

Saturday marks the anniversary of the Japanese launch. Even now, some 4.4 million fans a month still enjoy the augmented-reality app.

"I have walked 3,200km in one year" playing the game, a 48-year-old office worker said in a Tokyo park this month. After initially trying it just to see what the fuss was about, he quickly got hooked.

The man started walking around everywhere, including on his lunch break and on the way home after work. The resulting improvement in his physical condition encouraged him to play even more. He still plays the game daily.

Around half of the nation's "Pokemon Go" players are in their 40s or older, according to Tokyo research firm Values. Hard-core players, defined as those going into the app at least 20 days a month, constitute 40% of the user base. They visit many locations in search of monsters and spend money not only on game-related items, but also in such areas as food and transportation, opening up new opportunities for businesses.

Pulling power

McDonald's Holdings (Japan) turned its fast-food restaurants into PokeStops, where players can obtain in-game items, and Gyms, which serve as battle arenas, under a partnership with U.S. developer Niantic. Players flocked to eateries of the burger chain after the game launched.

This had a big impact on the company's business in 2016. Year-on-year growth in customer traffic at existing stores accelerated from 3% that June to 10% in July and 8% in August. July's existing-store sales soared 27%.

The updraft proved timely for a company just starting to recover from a 2014 scandal involving expired chicken meat. Same-store sales continued to grow at a double-digit clip in the following months, allowing McDonald's to post a 5.3 billion yen ($47.7 million) net profit for the year ended December 2016 after suffering a 34.9 billion yen loss the year before.

Business remains brisk this year. An initial forecast of an 8.5 billion yen net profit has already been upgraded to 14.5 billion yen -- a 170% jump from a year earlier. With the 16.8 billion yen profit record from 2000 looking within reach, the company's shares are in record territory.

Too good to last?

Talk in the market since early spring of a "'Pokemon Go' cliff" has called attention to the challenge McDonald's now faces. The company recorded a 19th consecutive month of revenue growth in June but acknowledges the difficulty of sustaining recent levels of growth in the second half and beyond.

This is hardly an isolated case. Softbank Group has seen more female visitors at its mobile phone stores since turning roughly 3,700 locations into PokeStops and Gyms last September, while Ito En has enjoyed a jump in sales from beverage vending machines that double as Pokemon Gyms.

How these businesses fare after the initial boost from "Pokemon Go" tie-ups runs its course, and how investors respond should performance slow, remain to be seen.

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