Picture: REUTERS/YVES HERMAN
Picture: REUTERS/YVES HERMAN

New York — McDonald’s reported its worst global sales decline in recent memory, with drive-throughs 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 UK and France.

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

All quarter long, McDonald’s had said international was weaker than its home market of the US, where comparable sales were down just 2.3% last month — nearly back to prepandemic levels. And they have become better since, turning slightly positive in July, said CFO Kevin Ozan.

Australian and Canadian comparable sales are also positive in July, even as other global markets continue to post sales declines.

Digital options

US sales were better than for rival restaurants reliant on in-person dining, with drive-through 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 CEO Chris Kempczinski said.

Meanwhile, the chain says 96% of its global restaurants are open again, with 99% operating at home. Of course, “open” does not necessarily mean for sit-down dining. Earlier this summer, the fast-food chain temporarily halted its reopening plans for US dine-in services. McDonald’s did not say on the call when it will resume opening dining rooms in the US, with Ozan noting it is 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 US will derail the recovery. Economic stimulus is another big issue that is up in the air that is likely to define the path forward for the world’s biggest restaurant company. When those first US stimulus cheques were cut, the impact was apparent in terms of comparable sales, Kempczinski said. If that dries up, sales could be hit.

Franchisee support

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

The company has tweaked its menu, such as with the end of all-day breakfast, to ease the return to operations and address changes in diner behaviour. 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.”

Bloomberg

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