(AP) – Business improved for McDonald’s in the second quarter as restrictions were lifted around the world, but giant fast food faces a bumpy and costly recovery (after reopening with new security measures, as seen in the video above),
McDonald’s President and CEO Chris Kempczinski said the coronavirus pandemic continues to cause uncertainty and dampen consumer sentiment. However, he believes that the period from April to June will be the minimum performance of the company.
“McDonald’s has learned to adapt our operations to this new environment,”; Kempczkinski said in a conference call with investors on Tuesday.
Of the 39,000 restaurants in the chain worldwide, 96% are now open, compared to 75% at the beginning of the second quarter. Comparable sales in the store, which fell by 39% in April, fell by only 12% by June.
However, the recovery is uneven. In general, stores with drive-thru windows recover faster when customers try to limit contact, the company said. Restaurants in city centers, shopping malls and tourist locations have harder times.
In some markets, such as Australia and Japan, sales were already taking place before 2019. Australia has seen a large increase in orders for the delivery of goods, which currently account for 10% of sales.
In China, the pace of improvement has slowed since the spring as consumers are still on the lookout for meals. Kempczkinski said he expects the model to be extended to 2021.
In the US, McDonald’s braked. Following the reopening of 2,000 canteens with a reduced number of seats, the company suspended reopening in early July as cases of coronavirus spread. Last week, McDonald’s said the delay in opening the canteen would be delayed by at least another month and would require face masks for anyone entering its restaurants.
Over the same period, US trade sales continued to improve over the same period in July, and the month is expected to be slightly positive compared to the previous year. Nearly all locations in the United States offer power units, and McDonald’s said it is also seeing an increase in U.S. supply orders.
In key European markets, McDonald’s – France, Germany and the United Kingdom – offer only two-thirds of restaurants, and customers have become accustomed to ordering at the counter. This slowed the recovery. In the UK, for example, restaurants were closed until May and canteens began to reopen until that month.
McDonald’s incurs heavy expenses to persuade customers to return, especially for breakfast. Chicago spent more than $ 200 million in the second quarter to support franchise marketing. It also provided $ 31 million to distribution centers – payments routinely made by franchisees – and $ 45 million to cover franchisees’ debts.
McDonald’s said it expects to spend $ 200 million in the second half of the year on ads that promote the core items of the offer and how to display and increase them.
The company said it would reduce planned capital expenditures by 2020 from $ 2.4 billion to $ 1.6 billion. After resuming business in the second half of the year, the company will help American franchisees complete about 900 rebuilding projects.
McDonald’s said it plans to close 200 restaurants in the United States this year, about half of which are in Walmart stores. The company continues to build 400 new restaurants in China.
McDonald’s said net income for the second quarter fell 68% to $ 484 million. Earnings adjusted for non-recurring items were 66 cents a share, a factor as short as the 74 cents Wall Street was looking for, according to a FactSet survey.
Sales in the same store fell by 24% for the entire quarter, which is a shameful analytical forecast. In the US, McDonald’s largest market, sales in the same store fell by 9%. Last year, they increased by 8% over the same period. Sales in the same trade on international markets decreased by 41%.
Revenues fell 30% to $ 3.76 billion, slightly more than expected.
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Shares of McDonald’s fell 2% in the morning trading to $ 197.18.
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