ussian Economic Situation Remains A Topic Of Concern
In the third quarter of fiscal 2014, McDonald’s 12 stores in Russia were temporarily shut-down on alleged claims of sanitary violations. Even though all of those stores are back in operation, Russia’s weakening economy has become a new concern and issue for international brands, including McDonald’s. Apart from depreciating Russian currency, rising costs of raw materials, and transportation charges, have forced the company to raise the price of its Big Mac by 2.2% to 94 Rubles ($1.77) in December. The Russian Ruble depreciated from 45 RUB per 1 USD in November, to 74 RUB per 1 USD in December, forcing the international brands to hike prices. [5] Europe’s commodity costs were up 1% in Q4 for the company, and relatively flat for the entire year.
All these major headwinds have pressured the company’s margins in the last six months. As a result, the company has made adjustments to its 2015 guidance, such as a reduction in capital expenditure by trimming planned new store openings in those markets that are facing short-term headwinds. The company’s capital expenditure budget for fiscal 2015 is approximately $2 billion. McDonald’s plans to open more than 1,000 restaurants in the U.S., China, Russia, and France, compared to 1,300 net openings in 2014. McDonald’s initiative to rebuild consumer trust in the brand, coupled with some operational strategies to protect the margins, will remain the key to the company’s performance in 2015.