Operations

McDonald's Q1 sales, earnings fall amid COVID-19 restrictions, closures

Even the giant QSR McDonald's is feeling the turbo-charged pinch of COVID-19, with its Q1 earnings down 17% due to declining sales worldwide.

McDonald's Q1 financials show the impact the pandemic is having on QSRs. (Photo: iStock)

April 30, 2020

McDonald's Corp. reported a slump in first-quarter sales and earnings as the COVID-19 pandemic forced the international hamburger chain to limit much its business to drive-thru and mobile ordering. 

Net income fell to $1.11 billion or $1.47, compared with $1.33 billion, or $1.72 in the year-ago quarter. Earnings came in below consensus estimates and McDonald's shares were down more than 2% in early morning trading at $183.68.

"The global crisis caused by the COVID-19 pandemic has significantly disrupted our business, and we continue to operate in a very challenging and unpredictable environment," McDonald's President and Chief Executive Officer Chris Kempczinski, said in the report. "McDonald's has seen a lot over our 65 years and I'm confident that the actions we're taking will enable us to emerge from this crisis in a position of competitive strength."

The company said the losses are due in part to key closures in European nations like France, Italy and the U.K., as well as January and early Febuary closures of 25% of its stores in China, according to the company's quarterly filing with the U.S. Securities and Exchange Commission. 

The Golden Arches said revenue dropped 6% in the first quarter to $4.71 billion.

The brand's drop-off in sales came despite the fact that through the end of February, same-store sales were up 8.1% in the U.S. and 7.2% globally. But after COVID-19-related business restrictions and closures began spreading worldwide in March and April, the brand ended the quarter with global same-store sales down 3.4%. 

On April 8, this year, McDonald's withdrew its 2020 outlook and long-term outlook due to the uncertainty related to the impact of COVID-19 on global economic conditions and the company's business operations.

 In other markets, currently: 

• Australia, Canada, Germany, Japan and Russia stores have mostly limited operations, with some closures. 
• France, Italy, Spain and the United Kingdom, have substantially closed all stores. 
• China has resumed business in 99% of stores, though demand is still off. 
• Japan has limited operations including Drive-thru, Delivery and Take-away only, in substantially all restaurants.
• Brazil has 65% of restaurants operating, mostly in a limited capacity. 

McDonald's steps to preserve financial flexibility include suspending its share repurchase program, increasing the company's cash position with $6.5 billion of new debt financing and reducing planned capital expenditures by approximately $1 billion for 2020.