McDonald’s facing bumpy recovery as second quarter sales fall 30%

Business improved for McDonald’s throughout the second quarter as lockdown restrictions lifted across the globe, but the fast food giant faces a bumpy and expensive recovery.

McDonald’s president and CEO Chris Kempczinski said the coronavirus pandemic continues to cause uncertainty and depress consumer sentiment. But he believes the April-June period will be the trough in the company’s performance.

In a conference call with investors, Mr Kempczkinski said: “McDonald’s has learned to adjust our operations to this new environment.”

30% Fall in McDonald's second quarter sales

McDonald’s said second-quarter net income fell 68% to £375 million.

Same-store sales fell 24% for the entire quarter, a point shy of analyst projections. In the US, McDonald’s biggest market, same-store sales fell 9%. Last year, they were up 8% in the same period. Same-store sales fell 41% in international markets.

Revenue fell 30% to £2.92 billion, slightly ahead of expectations.

Of the chain’s 39,000 restaurants worldwide, 96% are now open, compared with 75% at the start of the second quarter. Comparable-store sales that were down 39% in April were down only 12% by June.

The recovery is uneven, however. In general, stores with drive-through windows are recovering more quickly as customers try to limit contact, the company said. Restaurants in urban locations, shopping centres and tourist destinations are having a harder time.

In some markets, like Australia and Japan, sales are already running ahead of 2019. Australia has seen big increases in delivery orders, which now make up 10% of sales, the company said.

In China, the pace of improvement has slowed from the spring as consumers remain wary of eating out. Mr Kempczkinski said he expects that pattern to extend into 2021.

In the US, McDonald’s put on the brakes. After reopening 2,000 dining rooms with reduced seating, the company paused reopenings in early July as coronavirus cases spiked. Last week, McDonald’s said it will delay dining room reopenings for at least another month and will require face masks for anyone entering its restaurants.

Still, US same-store sales continued to improve throughout July and should end the month slightly positive compared to a year ago. Nearly all US locations offer drive-through, and McDonald’s said it is also seeing an uptick in US delivery orders.

In McDonald’s key European markets – France, Germany and the UK – only two-thirds of restaurants offer drive-through, and customers were more accustomed to ordering at the counter. That has slowed recovery.