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McDonald's Global Sales Suffer As COVID-19 Lockdowns Limit Operations

Published on Jul 30 2020 1:06 PM in Restaurant tagged: McDonald's

McDonald's Global Sales Suffer As COVID-19 Lockdowns Limit Operations

McDonald's Corp has reported a broad drop in global same-store sales and missed profit expectations as its restaurants were shut due to the COVID-19 pandemic, limiting operations to only drive-through and delivery.

Global same-store sales fell 23.9% in the second quarter, dragged down by big international markets, including the United Kingdom, France and Latin America.

Analysts had forecast a 23.24% fall, according to IBES data from Refinitiv.

In the United States, where the company operates more than a third of its restaurants, same-restaurant sales fell 8.7%, but were better than the anticipated 9.97% fall, as most locations were able to stay open with drive-through and delivery options.

On a conference call with investors, executives struck a cautious tone, but noted that US July sales have improved and should end "slightly positive" for the full month.

The second quarter "represents the trough in our performance as McDonald's has learned to adjust our operations to this new environment," CEOChris Kempczinski said.

Restaurants struggled to cope with the changing dynamics and consumer behaviors around the health crisis, forcing them to simplify menus and shift largely to online and mobile orders for pickup, delivery and drive-through.

As lockdowns eased, sales improved and losses were not as bad, providing some optimism for a measured rebound.

Approximately 96% of McDonald's locations are operating with drive-through, delivery or reduced seating capacity.

Advertising Push

The company plans an advertising push in the second half of the year, having "amassed a sizeable marketing war chest," Kempczinski said.

The burger chain had cut 70% spending on US marketing in the second quarter to "conserve resources", but will now reinvest that money.

Most of that will promote core menu items and digital ordering, though some menu innovation is planned.

Rent Collection, European Growth Opportunities And Japan

During the second half of the year, the company expects to collect the majority of rent it had deferred from franchisees.

McDonald's also sees a chance to grow in Europe, where "some independent restaurant units...are having some bigger challenges, which may present some further opportunities for us."

In Japan, the firm said that it plans to gradually reduce its stake in McDonald's Holding Company Japan from approximately 49% now, retaining at least 35%.

Revenue, Net Income And Earnings Per Share

Revenue fell by 30.5% to $3.76 billion, but beat the estimate of $3.68 billion.

Net income slumped by 68% to $483.8 million. Excluding one-time items, McDonald's earned 66 cents per share, eight cents below expectations.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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