) lured former Vice-Chairman James Cantalupo out of retirement last winter to become chairman and CEO, he vowed to reverse the fast-food chain's multiyear decline by going back to basics. Now, seven months into his tenure, McDonald's numbers are picking up.
Logging its best quarter since fall 2000, McDonald's said on July 29 that same-store sales at U.S. outlets rose 4.9%. The Oak Brook (Ill.) company didn't get the bump by selling more burgers and fries. Instead, Cantalupo credits two new hits: a line of premium salads and the McGriddle, new breakfast sandwiches.
Despite the new items, McDonald's net income slid again, dropping 5%, to $471 million, as sales fell across Europe and Asia. "We still have a long way to go," concedes the 59-year-old Cantalupo.
He says it will be 2005 before sales consistently rise by 3% to 5% and profits by 6% to 7%. That's hardly the growth in the company's heyday. But at Mickey D's, any positive number looks good compared with the past couple of years. Vivendi Universal (V
) execs are scrambling to keep a muffed auction for their Hollywood studio, cable channels, and theme park on track. The MGM (MGM
) film studio, a leading bidder with a $11.5 billion cash offer, dropped out after Vivendi hiked its price to $14 billion. Other bidders have said they're frustrated by Vivendi's refusal to turn over some financial details. For now, the bidders still include Liberty Media (L
) Viacom (VIA
) General Electric (GE
)'s NBC unit, and a group headed by Vivendi Vice-Chairman Edgar Bronfman Jr. Cable giant Comcast (CMCSK
) has asked to look at the books but is unlikely to bid at the current levels, says a source close to the deal. To stoke interest, Vivendi Chairman Jean-Rene Fourtou met in mid-July with potential bidders. He has set an Aug. 15 deadline for new bids and hopes to complete a deal by September. But he may have to bring his price back down. The SEC is opening another avenue of inquiry in its year-long probe of America Online's accounting practices. The online unit of AOL Time Warner (AOL
) received a request for information about its bulk-subscription program, as reported by The Wall Street Journal. Starting in 2001, AOL sold discounted memberships to strategic partners such as Sears Roebuck. The companies in turn sold the subscriptions for less than $10 each to employees. These members brought in lower revenues than full-price AOL subscribers paying $23.90 a month, but AOL disclosed few details of the program. It boosted growth, generating some 830,000 new members in 2001 and 2002. AOL and the SEC declined to comment. Declaring Xerox' (XRX
) turnaround complete, CEO Anne Mulcahy reported an 8% climb in second-quarter equipment sales on July 28. Gross margins remained 42%, and the company generated $682 million in cash, a 9% gain, despite weakness in the overall copier market. Although profits and sales both slipped 1% -- net income hit $86 million on revenue of $3.92 billion -- aggressive pricing helped increase share in key markets. Sales of higher-margin digital-office and production machines did particularly well. Just as critical for a company that faced possible bankruptcy only a few years ago: Cash on hand now sits at $2.3 billion, thanks in part to recent success raising money from bondholders, equity investors, and banks. Let the scrutiny begin. The Public Company Accounting Oversight Board laid out its plans for examining auditors and their roles in corporate meltdowns. The PCAOB will review the Big Four this year, then annually inspect all firms that audit 100 or more public companies. PCAOB's predecessor hired audit firms to examine each other. Critics are challenging a provision giving accountants a year to fix problems before reports are made public. Two of the PCAOB's five members said they would urge boards to demand auditors turn over reports before the one-year wait is over. Consumers, long the spending leaders in this recovery, are getting a case of the job blues. The Conference Board reported its index of consumer confidence fell almost seven points in July, to 76.6, the lowest since war-scarred March. The biggest fall came in how householders feel about the economy's future. The board said consumers' spirits are deflated by "the rising level of unemployment and sentiment that a turnaround in labor market conditions is not around the corner." Expectations are likely to remain weak until the labor market improves. -- Cendant's Henry Silverman exercised options on 2.8 million shares and sold the stock.
-- May Department Stores (MAY
) will sell 32 Lord & Taylor stores and cut up to 3,700 jobs.
-- Clayton Homes (CMH
) investors O.K.'d a $1.7 billion takeover by Berkshire Hathaway (BRK
). Ailing CIGNA (CI
) hurt by falling premiums and soaring medical costs, is putting its pension unit up for sale for about $2 billion. With its stock off 48% for the year, investors welcomed prospects of a cash infusion for the nation's third-largest health insurer: CIGNA shares rose 8.5%, to 45.37, on the July 30 news.