Originally created 07/21/98

Fast-food giant reveals detail of charges, layoffs at headquarters



CHICAGO -- McDonald's Corp. expects to take a pre-tax charge of $350 million against its second-quarter earnings to implement previously announced staff layoffs and realignments and to pay for a new menu ordering system, the fast-food giant announced today.

The Oak Brook, Ill.-based chain had said in mid-June that it would eliminate 525 headquarters positions, or 23 percent of the home office work force, to reduce expenditures and to better work with its realigned U.S. field operations.

As a result of those changes, company executives said today McDonald's will take a charge of $160 million, resulting in a savings next year of about $75 million and $100 million thereafter.

The company's rollout of its "Made for You" just-in-time ordering system will result in a charge of $190 million, at the high end of its previously announced estimates.

Combined, the charges are expected to result in a reduction to second-quarter net earnings of $235 million, or 33 cents a diluted share, the company said. McDonald's earnings are expected to be released on Monday; analysts before today's announcement had estimated the company would earn 65 cents a diluted share.

"The changes we are making are significant in scope and impact," said Jack Greenberg, who will become chief executive of the entire organization in August. "They are part of an ongoing process designed to make McDonald's more focused, competitive, productive and innovative."

Analysts have seen the layoffs as a gesture the fast-food giant, which has been slow to change, is willing to move more quickly and aggressive to revive sluggish domestic sales.

The Made for You ordering system has been seen by some as playing catchup to systems already in place by competitors Wendy's and Burger King. McDonald's has said the system will help the company provide innovations in bringing new food items to its menu, a step Wall Street says the company must make to boosts its bottom line.

Still, McDonald's stock has performed well this year. The company's stock finished at $73.62´ a share Monday on the New York Stock Exchange. That was near its 52-week high of $74.94 a share.