MCDONALD’S REPORTS DECLINE IN SECOND-QUARTER REVENUE
Stores closed in China; higher prices took toll on American demand
McDonald’s revenue fell short of expectations in the second quarter as coronavirus restrictions shuttered stores in China and higher prices took a toll on U.S. demand.
The Chicago burger giant said its revenue fell 3 percent to $5.72 billion in the April-June period.
That was short of Wall Street’s forecast of $5.8 billion, according to analysts polled by FactSet.
Same-store sales, or sales at stores open at least a year, were up nearly 10 percent worldwide. That was higher than the 6.8 perOzan cent that analysts had expected.
But there were double-digit declines for comparable stores in China, where restaurants were closed temporarily throughout the country for most of the quarter.
U.S. same-store sales rose 3.7 percent. McDonald’s said most of that increase was due to higher prices, with store traffic remaining flat.
Chief Financial Officer Kevin Ozan said McDonald’s is seeing some trade-down to cheaper items and lower sales of combo meals in the U.S., particularly among lower-income consumers.
The number of customers per sale has also declined from the height of the pandemic, when locked-down families would often pick up large orders at the drivethru.
said year-over-year U.S. price increases in the 8 percent to 9 percent range will likely continue through the remainder of the year as McDonald’s compensates for its higher costs. McDonald’s expects food and paper costs to be up 12 percent to 14 percent for the full year, while its labor costs are up 10 percent.
CEO Chris Kempczinski said McDonald’s has benefited from another form of trading down, with higher-income Americans choosing on some days to hit a McDonald’s rather than more expensive sit-down restaurants.
“Even though we’re pushing through pricing, the consumer is tolerating it well,” Kempczinski said.
McDonald’s profit fell 46 percent to $1.19 billion. That included $1.2 billion in charges related to the sale of its 850 stores in Russia.
In mid-May, McDonald’s sold its Russian restaurants to a McDonald’s licensee who operates 25 restaurants in Siberia. The restaurants began reopening last month under a new name: Vkusno-i Tochka (Tasty-period).
McDonald’s also reported a $271 million gain from the sale of its Dynamic Yield business to Mastercard. McDonald’s bought the startup — which specializes in decision logic technology — in 2019 in a bid to personalize its drive-thru menu boards.
Excluding one-time items, McDonald’s earned $2.55 per share. That was ahead of Wall Street’s forecast of $2.45 per share.
McDonald’s shares rose 2.68 percent, closing at $257.09 in Tuesday trading.