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McDonald's to Post its First-Ever Loss

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Oak Brook, Illinois--McDonald's Corp., the world's largest restaurant company, last week said it would post its first-ever loss in the fourth quarter, as it struggles to turn around its U.S. business and pulls back from expansion in some foreign markets. Including restructuring charges of about $390 million, the company said it expects to lose 5 to 6 cents a share. Most important, said analysts, comparable sales in the quarter are down, with sales at U.S. units open at least one year falling 1.3 percent in the two months ended November 30 and 1.5 percent through the first 11 months of the year. McDonald's also indicated that fourth-quarter sales are worsening, with sales in December showing poorer trends than October and November.

Additionally, there is a bulge of McDonald's franchisees nearing retirement who have been reluctant to reinvest in their stores, analysts said. The company is about to inaugurate a new program to invest up to $400 million renovating or rebuilding every McDonald's in the United States that is more than 15 years old. The company will loan franchisees money to make the improvements; if sales do not increase, franchisees do not have to pay back the loan. A similar program in Southern California and France resulted in sales growth of 1 to 3 percentage points at individual stores. -Reuters, The Wharton School of the University of Pennsylvania

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