McDonald's Outlines Restructuring Charges -- 3rd Update

By Josh Beckerman 

McDonald's Corp. said Thursday that it expected to book pretax charges of about $130 million in its September quarter related to the company's previously announced restructuring and refranchising efforts.

Last November, among other moves, McDonald's announced plans to increase the number of restaurants it would to sell to franchisees to 4,000 by the end of 2018, from its earlier target of 3,500.

McDonald's said Thursday that the charges total 12 cents a share after taxes and that it expected to incur more such costs in the future. The company will provide more details on the charges and its refranchising moves when it reports earnings on Oct. 21.

Shares rose 9 cents to $115.50 in after-hours trading.

Under Chief Executive Steve Easterbrook, the fast-food icon has sought to revamp its structure as well as its food as it contends with many fast-casual players like Panera Bread Co. and burger upstarts like Five Guys Holdings LLC and Shake Shack Inc.

The company's big moves have included offering all-day breakfast. It has announced several personnel changes in recent months, including the retirement of U.S. President Mike Andres and Chief Administrative Officer Pete Bensen. David Hoffmann, a 22-year McDonald's veteran, left to join Dunkin' Donuts.

In November, McDonald's also increased its goal for general and administrative cost-savings to $500 million from $300 million. It also said it would boost cash returns to shareholders, partly by issuing debt at a time of low interest rates. Last month, it raised its quarterly dividend 6%, citing "meaningful progress" in its turnaround plan.

The restaurant industry's push toward franchising, including significant moves by Wendy's Co. and Burger King, cuts corporate revenue but helps companies avoid the volatility of labor and commodity costs.

McDonald's has taken several steps as it looks to improve food quality, such as switching from cooking beef patties on Teflon sheets to searing them on an iron grill. In a consumer marketplace that has grown more focused on healthy ingredients, the chain said sugar would replace high-fructose corn syrup in hamburger buns.

The company has also enhanced social media efforts as it tries to win back younger customers. Just one in five millennials has ever tried the Big Mac, according to an internal memo reviewed by The Wall Street Journal.

--Julie Jargon contributed to this article.

Write to Josh Beckerman at [e-mail]

(END) Dow Jones Newswires

October 13, 2016 18:38 ET (22:38 GMT)

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