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McDonald's sales tumbled 30% last quarter, but it's optimistic about a turnaround

McDonald's revenue sank 30% in the second quarter compared to a year ago. CNN's Clare Sebastian reports.

Posted: Jul 29, 2020 8:41 AM
Updated: Jul 29, 2020 8:41 AM

McDonald's is having a rough year, as shown in another dismal quarterly earnings report -- but there are signs of recent improvement.

Total sales sank 30% in the second quarter compared to a year ago, McDonald's announced Tuesday, falling to $3.77 billion. Net income plummeted 68% to $483.8 million. The figures reflect the April to June period, the first full quarter of coronavirus effects in the United States.

"In many markets around the world, most of notably in the US, the public health situation appears to be worsening," McDonald's CEO Chris Kempczinski said in its earnings call. "Nonetheless, I believe that Q2 represents the trough in our performance as McDonald's has learned to adjust our operations to this new environment."

Beneath the dismal numbers, some numbers indicated improvement as the quarter went on.

For example, US same-store sales were down 19.2% in April compared to last year. But that loss narrowed rapidly, to down 5.1% in May and just a 2.3% decrease in June. Sales in July "trended up", according to Chief Financial Officer Kevin Ozan, and he expects it them to be "slightly positive" for the month.

But same-store sales outside the US fell even more and their recovery has been slower, dragging down total global same-store sales. That global figure was down 39% in April compared to last year, almost 21% in May and more than 12% in June.

Breakfast, which was previously a troublesome part of the day for McDonald's prior to Covid-19, continues to be a drag on its sales. In addition to rising competition, such as from Wendy's, the meal also "continues to be disproportionately impacted by disruptions to commuting routines," Kempczinski said. A marketing push for breakfast will roll out later this year.

McDonald's said its drive-thru, delivery and digital options are helping to bolster its business. Kempczinski said the company has seen "significant increases" in drive-thru sales across its restaurants as many locations were forced to shutter their dining rooms. That said, the company has slowed the reopening of dining rooms in states where the number of virus cases are still rising.

The virus, however, has prompted McDonald's to accelerate the closures of restaurants originally planned to shut down in years anead. The company will close 200 locations this year, with more than half of them being in "low-volume" Walmart locations.

The company also announced plans to divest part of its stake in its Japan business, and will reduce its ownership there from about 49% to at least 35%.

The move is intended to help give the company more "financial flexibility" as it looks to save cash and preserve its liquidity throughout the pandemic, according to Ozan.

Japan has been a bright spot for McDonald's in recent years. Same-store sales there grew last quarter, "partly thanks to our brand's reputation for cleanliness and convenience with Japanese customers," Kempczinski said.

The decision to dial back in the market signals "our confidence in the local management team," Ozan added.

Kempczinski also said that internal surveys of McDonald's customers about the year ahead are gloomy.

"I'm certainly not qualified to make any predictions around whether we're going to be in recession or not, but I'd certainly say there's a lot of warning signs out there that would suggest that the consumer sentiment and consumer concerns about the economy is negative and going in the wrong direction," he said.

Shares closed down 2.5% on Tuesday.

— Michelle Toh contributed to this report.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 658043

Reported Deaths: 12467
CountyCasesDeaths
Marion902221628
Lake48163871
Allen35614632
Hamilton31884394
St. Joseph29615510
Elkhart25291412
Vanderburgh21148377
Tippecanoe19815197
Johnson16262353
Porter15867268
Hendricks15744297
Clark11860179
Madison11688315
Vigo11520228
Monroe10267158
Delaware9800178
LaPorte9725194
Howard9024194
Kosciusko8519107
Bartholomew7394147
Warrick7380147
Hancock7379128
Floyd7149165
Wayne6597189
Grant6406157
Morgan6044124
Boone604188
Dubois5876111
Dearborn541266
Henry539892
Marshall5397104
Cass538999
Noble507575
Jackson462663
Shelby458890
Lawrence4161111
Gibson400581
Harrison395960
Clinton393353
DeKalb382878
Montgomery382883
Miami355163
Knox354484
Whitley347235
Huntington339276
Steuben336355
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Randolph225076
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Washington208727
Sullivan202239
Fountain200641
Starke186450
Owen181652
Fulton177437
Jay177328
Carroll175718
Perry172635
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Rush164222
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Tipton145641
Parke138415
Pike127232
Blackford120327
Pulaski106243
Newton96431
Brown94839
Benton91213
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Martin80014
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Warren74712
Union66810
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Ohio Coronavirus Cases

Data is updated nightly.

Cases: 959995

Reported Deaths: 17045
CountyCasesDeaths
Franklin1111071193
Cuyahoga945941709
Hamilton72643947
Montgomery46983875
Summit39720942
Butler35094460
Lucas34829757
Stark29061835
Warren22166270
Lorain21781386
Mahoning19282537
Lake18210300
Clermont18200206
Delaware16289129
Licking14832197
Fairfield14401156
Trumbull14171455
Greene13481211
Medina13220219
Clark12139333
Wood11411193
Portage10870153
Allen10715232
Richland10184205
Miami9954179
Columbiana8052179
Muskingum8046123
Tuscarawas7984235
Pickaway796798
Marion7944135
Wayne7799217
Erie6803183
Ross6083136
Geauga5996129
Hancock5945110
Scioto5886105
Ashtabula5884143
Lawrence520373
Union506552
Darke5013122
Belmont483987
Sandusky473393
Jefferson4726107
Huron4722117
Seneca4624103
Athens457331
Mercer4570101
Auglaize454498
Washington452186
Shelby439167
Knox398584
Putnam3967101
Madison389147
Ashland375495
Fulton375364
Defiance3682102
Brown367842
Crawford355396
Preble351070
Logan350158
Clinton336862
Highland324455
Ottawa319667
Williams299777
Jackson287756
Guernsey284034
Champaign283145
Fayette266343
Perry265943
Morrow257224
Henry243665
Holmes2420104
Hardin241957
Coshocton230847
Van Wert227849
Gallia219846
Adams213732
Pike212825
Wyandot207952
Hocking192248
Carroll178928
Paulding158023
Meigs133836
Noble128142
Monroe115336
Morgan99734
Harrison99632
Vinton76515
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