McDonald's bounces back after KFC scandal in China (MCD 2Q05 conf call quotes)

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Includes: MCD, YUM
by: Ezra Marbach

Yum! Brands (ticker: YUM) recently suffered a sales slowdown in China due to allegations of chicken contamination. How did the scandal affect other Western fast food companies in China? Here are key quotes attributed to McDonald's (ticker: MCD) CEO Jim Skinner from management's Q2 2005 earnings results conference call:

....I think the impact that KFC felt, we sort of felt some of that as well. Particularly this dye issue that they had reflected negatively on all quick service restaurants, including McDonald's. Although it had nothing to do with us. And they're still suffering some from that. And as we are, just in terms of the general marketplace.

....But you we, as you know, have made substantial changes in China relative to the focus of our talent. The capability of scaling in that marketplace, we're opening 100 restaurants a year now. We expect have more than a 1,000 by 2008. And the strategic nature of our behavior there regarding the everyday affordability has also been ramped up and we're getting the proper products in position to be successful. At one time that everyday affordable menu was very successful for us. And then we took a couple of products off the menu, which was not very smart. And we now have them back on. And just at the end of last month and we're seeing things moving back in the right direction for that very important segment of our business. And we believe that we're moving in the right direction there.

(Quotes are from the CCBN StreetEvents transcript.)


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