McDonald's shelves plans to sell Japan unit stake after rebound

[TOKYO] McDonald's Corp said it's shelving plans to sell a stake in its Japan unit that's seen a turnaround since the company announced it was looking for a buyer more than a year ago.

After a review, the world's largest restaurant chain has "made the decision to not proceed with the transaction at this time," said chief financial officer Kevin Ozan on an earnings call with analysts Tuesday.

The decision to keep McDonald's Holdings Co Japan won't impact long-term financial targets or its intention to reach its goal of having 95 per cent of restaurants franchised over the long term, he said.

"We're confident that we have the right capabilities and customer-focused plans to grow our business in Japan, and we believe the market is poised to maintain its strong momentum," said Mr Ozan.

When McDonald's announced it was studying the prospect of a sale in Jan 2016, the Japan unit had posted quarterly losses since mid-2014 in the wake of a series of food scandals. Since then, the unit has rebounded and forecast in February that net income for 2017 will probably be 8.5 billion yen (S$106 million).

Pokemon Frenzy

In March, the unit reported same-store sales rose almost 17 per cent from a year ago, extending its monthly sales growth to 16 consecutive months. It's lured customers by bringing back popular menu items and maintained momentum in the wake of a worldwide mobile game frenzy sparked by Nintendo Co's mobile game, Pokemon Go, in which the restaurant gave away figurines of the game's cartoon characters.

Japan was the biggest contributor to growth in McDonald's so-called foundational market segment where it's focused on increasing franchises, with "double-digit comparable sales on top of double-digit performance in the first quarter of 2016," according to the company.

McDonald's was seeking to sell as much as 33 per cent of outstanding shares in the Japan unit, the Nikkei newspaper had reported.

Shares of McDonald's Japan have risen about 12 per cent this year, compared to the 0.8 per cent gain in the benchmark Topix index.

BLOOMBERG