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RetailMcDonald's

McDonald’s posts worst global sales decline in at least 15 years

By
Anne Riley Moffat
Anne Riley Moffat
,
Gerald Porter Jr.
Gerald Porter Jr.
, and
Bloomberg
Bloomberg
Down Arrow Button Icon
By
Anne Riley Moffat
Anne Riley Moffat
,
Gerald Porter Jr.
Gerald Porter Jr.
, and
Bloomberg
Bloomberg
Down Arrow Button Icon
July 28, 2020, 9:42 AM ET
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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 3.6% in pre-market trading in New York.

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. But even that may have disappointed investors, who’d been hoping June levels would be flat, RBC Capital Markets analyst Christopher Carril wrote in a note.

Drive-Thru Boost

Still, 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, and investors listening to the call later this morning will be anxious to learn more on that pause.

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.

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.

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