McDonald’s Reports Lower Q2 Revenue, Weighed Down by Charges
McDonald’s revenue missed projections in the second quarter as China’s restaurants were forced to close due to coronavirus restrictions and U.S. demand was negatively impacted by rising pricing.
The burger king of Chicago reported a 3% decline in revenue to $5.72 billion between April and June. According to analysts surveyed by FactSet, that fell short of the $5.8 billion projection made by Wall Street.
Around the world, same-store sales, or sales at stores open for at least a year, increased by about 10%. That was more than the analysts’ predicted 6.8%.
But in China, where restaurants were temporarily shut down throughout the nation for most of the quarter, there were double-digit decreases for comparable stores.
Same-store sales increased 3.7% in the US. According to McDonald’s, the majority of this rise was brought on by rising prices, with no change in shop traffic.
Kevin Ozan, the chief financial officer of McDonald’s, claimed that lower-income customers, in particular, are trading down to less expensive items and reducing the sales of combination meals. From the peak of the pandemic, when locked-down families would frequently pick up sizable orders at the drive-thru, the number of customers per sale has also decreased.
As McDonald’s makes up for its higher costs, Ozan said that year-over-year U.S. pricing rises in the 8% to 9% range will likely last the rest of the year. For the entire year, McDonald’s anticipates that food and paper expenses would increase by 12% to 14% while labor costs will increase by 10%.
Another instance of trading down, according to CEO Chris Kempczinski, has helped McDonald’s as higher-income Americans occasionally opt to eat at a McDonald’s rather than spending more money at a sit-down restaurant.
The consumer is accepting the pricing well, even though we are forcing it through, according to Kempczinski.
Profit at McDonald’s dropped 46% to $1.19 billion. This includes expenses totaling $1.2 billion for the sale of its 850 outlets in Russia.
Midway through May, McDonald’s sold its Russian locations to a McDonald’s licensee that runs 25 locations in Siberia. Last month, the eateries reopened under a new name: Vkusno-i Tochka (Tasty-period).
Additionally, McDonald’s disclosed a gain of $271 million on the sale of its Dynamic Yield company to Mastercard. 2019 saw McDonald’s acquire the decision logic technology-focused business to customize its drive-thru menu boards.
McDonald’s made $2.55 per share after excluding one-time items. That exceeded the $2.45 per share prediction made by Wall Street.
In noon trading, McDonald’s stock increased by 2.5%.
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