McDonald’s Posts Plunge in Global Sales Even as U.S. Inches Back

McDonald’s Corp. reported its worst global sales decline in recent memory, with drive-thrus and delivery unable to make up for the blows from pandemic shutdowns and consumer caution.

The fast-food company’s total same-store sales in the second quarter dropped 23.9%, slightly worse than what analysts had been expecting despite getting mid-quarter updates throughout the spring -- and the worst performance in Bloomberg data going back to at least 2005. That was dragged down by a 41.4% plunge in its international operated markets unit, which includes stores in countries such as Spain, the U.K. and France.

McDonald’s shares fell as much as 2.2% in New York, the biggest intraday decline in a month.

McDonald’s Posts Plunge in Global Sales Even as U.S. Inches Back

All quarter long, McDonald’s had said international was weaker than its home market of the U.S., where comparable sales were down just 2.3% last month -- nearly back to pre-pandemic levels. And they’ve gotten better since, turning slightly positive in July, according to Chief Financial Officer Kevin Ozan. Australian and Canadian comparable sales are also positive in July, even as other global markets continue to post sales declines.

Drive-Thru Boost

U.S. sales were better than for rival restaurants reliant on in-person dining, with drive-thru and takeout options easing the burden. The burger chain has been revamping digital options over the past few years, including touchscreen kiosks, which was a step that “served us well through these uncertain times,” McDonald’s Chief Executive Officer Chris Kempczinski said in a statement.

Meanwhile, the chain says 96% of its global restaurants are open again, with 99% operating at home. Of course, “open” doesn’t necessarily mean for sit-down dining. Earlier this summer, the fast-food chain temporarily halted its reopening plans for U.S. dine-in services. McDonald’s didn’t say on the call when it will resume opening dining rooms in the U.S., with Ozan noting it’s taking a “thoughtful” and “responsible” approach and working with franchisees to decide.

The other big question now is whether a resurgence of Covid-19 in parts of the U.S. will derail the recovery. Economic stimulus is another big issue that’s up in the air that will likely define the path forward for the world’s biggest restaurant company. When those first U.S. stimulus checks were cut, the impact was very apparent in terms of comparable sales, Kempczinski said on the call. If that dries up, sales could be hit.

Franchisee Support

To help with declining sales, McDonald’s said it spent $100 million to support its U.S. franchisees, with a similar amount going to international operated markets. The company also paid $31 million to distribution centers for “obsolete inventory” to support liquidity at the franchise level.

The company also made tweaks to its menu this spring, such as the end of all-day breakfast, to ease the return to operations and address changes in diner behavior. Some of those cut items will come back, but only if they “earn” a place on the menu, Kempczinski said.

“As we come out of it, I think it is a safe bet that you are going to see us add items back to the menu,” he said. “It’s also equally a safe bet we aren’t going to go all the way back to where we were.”

©2020 Bloomberg L.P.

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