For the first time in 11 years, McDonald’s Japan is in the red. The company today predicted a net loss of 17 billion yen ($157 million) for the current fiscal year, owing to a sharp decline in sales following this summer’s expired-meat scandal.
The scandal unfolded in China, where the US-owned meat supplier Shanghai Husi Food was exposed for processing expired and discarded meat—beef and chicken that went into burgers, sandwiches, and nuggets at fast food restaurants all over China, as well as McDonald’s Japan.
Though McDonald’s Japan vowed to stop using chicken from the Chinese supplier as soon as the news broke, saying it would turn to Thailand for chicken instead, consumers were not reassured. Same-store sales in Japan, where there are approximately 3,000 McDonald’s outlets, were 25% lower in August 2014 than in August 2013—the largest drop in year-over-year sales McDonald’s Japan has seen since it went public in 2001.
The decline in sales, which persisted beyond August, was coupled with increased operating costs as stores took new quality control measures. The result is a 17 billion yen loss rather than the 6 billion yen in profit that was originally expected this year. In 2013, McDonald’s Japan recorded a net profit of 5.14 billion yen.