McDonald's faces potential US$50m loss per month from Russia store closure

McDonald's faces potential US$50m loss per month from Russia store closure

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McDonald's has shut down its operations in Russia. However, the move is expected to cost the fast-food restaurant US$50 million a month, or about five to six cents per share, CFO Kevin Ozan said at the UBS Global Consumer and Retail Conference, multiple sources such as Reuters and CNBC reported.

McDonald's has also closed 108 of its stores in Ukraine for the time being. Together, these stores account for about 2% of its sales, 9% of its revenue and 3% of its operating income, CNBC reported. 

However, McDonald's CEO Chris Kempczinski said in a statement that it will continue to provide salaries for all affected employees. Additionally, McDonald's donated US$5 million to its Employee Assistance Fund to provide financial support to its employees in Ukraine.

McDonald's also deployed its Ronald McDonald House Charities (RMHC) Poland Care Mobile to the Polish-Ukrainian border to provide medical care and humanitarian aid for families and children, with another Care Mobile en route from RMHC Latvia. "As many of our colleagues in Ukraine have sought refuge, they have found the familiar support of the McDonald’s System in new and unfamiliar places," Kempczinski said.

McDonald's joins a long list of brands that have ceased operations in Russia to show their support for Ukraine. For instance, Starbucks paused all Russian business activity and closed its cafes there temporarily. It will also continue to provide salaries to its 2,000 employees during the closure. Meanwhile, Yum! Brands has ceased operations of KFC company-owned restaurants in Russia and is finalising an agreement to suspend all Pizza Hut restaurant operations in Russia, in partnership with its master franchisee. It will also redirect all profits from operations in Russia to humanitarian efforts.

However, not all brands have succumbed to international pressure. UNIQLO, a brand owned by Fast Retailing, currently has no plans to suspend its operations and will continue to operate all 50 stores in Russia, while monitoring the situation. According to multiple sources such as Nikkei AsiaChannel NewsAsia and Bloomberg, Fast Retailing's CEO Tadashi Yanai defended the brand's stance, saying that the Russians still need access to daily necessities such as clothing.

Photo courtesy: 123RF

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