McDonald’s shares plunge after worst sales drop in recent memory

Drive-thrus and delivery businesses for the world’s biggest restaurant company were unable to make up for the pandemic shutdowns and consumer caution

McDonald's reported a steep drop in second-quarter profits on much lower sales due to coronavirus closures that affected most of the chain's worldwide network. AFP 

McDonald’s 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 per cent, 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 per cent 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 3.6 per cent in pre-market trading in New York.

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 per cent last month – nearly back to pre-pandemic levels. Its drive-thru and takeout options played a role in 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 Chris Kempczinski said in a statement.

Meanwhile, the chain says 96 per cent of its global restaurants are open again, with 99 per cent 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 US dine-in services.

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 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 (Dh367m) to support its US franchisees, with a similar amount going to international operated markets. The company also paid $31m 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.