July 28, 2020 / 11:17 AM / 12 days ago

UPDATE 3-McDonald's global sales suffer as COVID-19 lockdowns limit operations

(Adds plan to reduce stake in Japan holding company in 16th paragraph)

By Nivedita Balu and Hilary Russ

July 28 (Reuters) - McDonald's Corp on Tuesday 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-thru and delivery.

Shares of the Chicago-based burger chain sank more than 2.5%.

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-thru and delivery options.

On a conference call with investors, executives struck a cautious tone but noted that U.S. 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," Chief Executive Officer Chris 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-thru.

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

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

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 U.S. 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.

The company also expects to collect during the second half of the year 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 it planned to gradually reduce its stake in McDonald's Holding Company Japan from around 49% now, retaining at least 35%.

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

Net income slumped 68% to $483.8 million. Excluding one-time items, McDonald's earned 66 cents per share, 8 cents below expectations. (Reporting by Nivedita Balu in Bengaluru and Hilary Russ in New York; Editing by Bernard Orr, Steve Orlofsky and Sherry Jacob-Phillips)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below