CHICAGO, April 30, 2020 /PRNewswire/ -- McDonald's
Corporation today announced results for the first quarter ended
March 31, 2020.
"Following our strong performance in 2019, McDonald's began 2020
with exceptional global momentum, and our January and February
sales were reflective of that trend. Since then, 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," said McDonald's President and Chief
Executive Officer Chris Kempczinski.
"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 determination and team
spirit across the McDonald's System is evident as we continue to
offer affordable, convenient food while at the same time providing
for the safety of our crew and customers and continuing our legacy
of supporting local communities in which we operate."
The Company delivered strong global comparable sales and results
for the two months ended February
2020. The outbreak of COVID-19 and the resulting operational
impact brought on by several related factors, including restaurant
closures, limited operations and dramatic changes in consumer
behavior, led to a marked decline in sales during the second half
of March and significantly affected the Company's first quarter
results. On April 8, 2020, McDonald's
withdrew its 2020 Outlook and its Long-Term Outlook due to the
uncertainty related to the impact of COVID-19 on global economic
conditions and the Company's business operations.
First quarter financial performance and operational update:
- Global comparable sales declined 3.4%.
- Consolidated revenues decreased 6% (5% in constant
currencies).
- Systemwide sales decreased 4% (2% in constant currencies).
- Diluted earnings per share of $1.47 decreased 15% (13% in constant
currencies).
- Steps to preserve financial flexibility include suspending
McDonald's 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.
- Approximately 75% of McDonald's restaurants worldwide remain
open to serve customers, the majority of which have adapted to
focus on Drive-thru, Delivery, and/or Take-away.
COMPARABLE
SALES
|
|
|
|
Increase/(Decrease)
|
|
|
Two months ended
February 29, 2020
|
Month ended March
31, 2020
|
Quarter ended
March 31, 2020
|
Quarter ended
March 31, 2019
|
U.S.
|
|
8.1%
|
(13.4)%
|
0.1%
|
4.5%
|
International
Operated Markets
|
|
8.5
|
(34.7)
|
(6.9)
|
6.0
|
International
Developmental Licensed Markets & Corporate
|
|
3.7
|
(19.4)
|
(4.3)
|
6.0
|
Total
|
|
7.2%
|
(22.2)%
|
(3.4)%
|
5.4%
|
- Comparable Sales: The Company delivered strong global
comparable sales results for the two months ended February 2020, with all segments benefiting from
Leap Day. Globally, sales results began to markedly decline during
the second half of March due to COVID-19, which caused significant
restaurant closures and "shelter-in-place" guidance. The sales
trends from the second half of March have continued into April, and
are expected to continue while these restrictions are in
place.
-
- U.S. and International Operated Markets: Comparable
sales results for the two months ended February 2020 reflected balanced growth in
average check and guest counts. The comparable sales decline in the
International Operated Markets segment for both the month of March
and the quarter were primarily driven by temporary restaurant
closures in France, the
United Kingdom and Italy.
- International Developmental Licensed Markets: Comparable
sales results for the quarter were primarily impacted by
China, which had approximately 25%
of restaurants fully closed in early February, at the peak of the
Company's closures in that market.
KEY FINANCIAL METRICS
- CONSOLIDATED
Dollars in millions, except per share data
|
|
Quarters Ended
March 31,
|
2020
|
2019
|
Inc/
(Dec)
|
Inc/
(Dec) Excluding Currency Translation
|
Revenues
|
$
|
4,714.4
|
$
|
5,024.1
|
(6)%
|
(5)%
|
Operating
income
|
1,693.6
|
2,094.0
|
(19)
|
(17)
|
Net income
|
1,106.9
|
1,328.4
|
(17)
|
(16)
|
Earnings per
share-diluted
|
$
|
1.47
|
$
|
1.72
|
(15)%
|
(13)%
|
Results for the quarter reflected sales performance declines due
to restaurant closures, limited operations and dramatic changes in
consumer behavior as a result of COVID-19.
Foreign currency translation had a negative impact of
$0.02 on diluted earnings per share
for the quarter.
RESTAURANT UPDATE
Below is a summary of the operating status of McDonald's
restaurants around the world as of April 30,
2020. The Company continues to follow the guidance of expert
health authorities to ensure the appropriate precautionary steps
are taken in this evolving business environment to protect the
health and safety of our people and our customers.
Percent of
Operating Restaurants*
|
|
|
As of April 30,
2020
|
U.S.
|
99%
|
International
Operated Markets
|
45
|
International
Developmental Licensed Markets
|
80
|
Total
|
75%
|
|
|
* Restaurants include those with limited operations
including Drive-thru, Delivery, and/or Take-away.
|
|
U.S.:
- Substantially all restaurants are operating Drive-thru,
Delivery, & Take-away only. Limited menus and hours may
apply.
- Restaurants that are closed are primarily due to their
locations (e.g., unique sites such as malls).
International Operated Markets:
- Markets, such as Australia,
Canada, Germany and Russia have limited operations, which could
include Drive-thru, Delivery and/or Take-away; some restaurants
within these markets are temporarily closed, have limited hours,
menus and/or restricted capacity.
- Several markets, such as France, Italy, Spain
and the United Kingdom, have
temporarily closed substantially all restaurants.
International Developmental Licensed Markets:
- China has resumed operations
in 99% of restaurants, although the market continues to experience
a reduced level of demand as consumers have not fully returned to
their pre-COVID routines.
- Japan has limited operations
including Drive-thru, Delivery and Take-away only, in substantially
all restaurants.
- Brazil has 65% of restaurants
operating, the majority of which have limited operations.
- Operating hours in most other countries are driven by
government regulations.
THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED
THROUGHOUT THIS RELEASE
Constant currency results exclude the effects of foreign
currency translation and are calculated by translating current year
results at prior year average exchange rates. Management reviews
and analyzes business results excluding the effect of foreign
currency translation, impairment and other strategic charges and
gains, as well as income tax provision adjustments related to the
Tax Cuts and Jobs Act of 2017, and bases incentive compensation
plans on these results, because the Company believes this better
represents underlying business trends.
Comparable sales are compared to the same period in the prior
year and represent sales at all restaurants, whether operated by
the Company or by franchisees, in operation at least thirteen
months including those temporarily closed. Some of the reasons
restaurants may be temporarily closed include reimaging or
remodeling, rebuilding, road construction and natural disasters
(which includes restaurants temporarily closed due to COVID-19 in
2020). Comparable sales exclude the impact of currency translation,
and, since 2017, also exclude sales from Venezuela due to its hyper-inflation.
Management generally identifies hyper-inflationary markets as those
markets whose cumulative inflation rate over a three-year period
exceeds 100%. Management believes that these exclusions more
accurately reflect the underlying business trends. Comparable sales
are driven by changes in guest counts and average check, which is
affected by changes in pricing and product mix. The goal is to
achieve a relatively balanced contribution from both guest counts
and average check.
Comparable guest counts represent the number of transactions at
all restaurants, whether operated by the Company or by franchisees,
in operation at least thirteen months including those temporarily
closed.
Systemwide sales include sales at all restaurants, whether
operated by the Company or by franchisees. While franchised sales
are not recorded as revenues by the Company, management believes
the information is important in understanding the Company's
financial performance, because these sales are the basis on which
the Company calculates and records franchised revenues and are
indicative of the financial health of the franchisee base. The
Company's revenues consist solely of sales by Company-operated
restaurants and fees from franchised restaurants operated by
conventional franchisees, developmental licensees and
affiliates.
RELATED COMMUNICATIONS
This press release should be read in conjunction with Exhibit
99.2 in the Company's Form 8-K filing for supplemental information
related to the Company's results for the quarter ended
March 31, 2020.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 7:30 a.m. (Central Time) on April 30, 2020.
A link to the live webcast will be available at
www.investor.mcdonalds.com. There will also be an archived webcast
available for a limited time thereafter.
To learn more about McDonald's community response to COVID-19,
visit www.mcfamily.mcdonalds.com.
UPCOMING COMMUNICATIONS
For important news and information regarding McDonald's,
including the timing of future investor conferences and earnings
calls, visit the Investor Relations section of the Company's
Internet home page at www.investor.mcdonalds.com. McDonald's uses
this website as a primary channel for disclosing key information to
its investors, some of which may contain material and previously
non-public information.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer
with over 38,000 locations in over 100 countries. Approximately 93%
of McDonald's restaurants worldwide are owned and operated by
independent local business owners.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements,
including statements regarding the impacts that the novel COVID-19
pandemic may have on our future operations, which reflect
management's expectations regarding future events and operating
performance and speak only as of the date hereof. These
forward-looking statements involve a number of risks and
uncertainties. Factors that could cause actual results to differ
materially from our expectations are detailed in the Company's
filings with the Securities and Exchange Commission, including the
risk factors discussed in Exhibit 99.2 in the Company's Form 8-K
filing on April 30, 2020. The Company undertakes no obligation
to update such forward-looking statements, except as may otherwise
be required by law.
McDONALD'S
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
Quarters Ended
March 31,
|
2020
|
|
2019
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
2,025.8
|
|
$
|
2,240.5
|
|
$
|
(214.7)
|
|
(10)%
|
Revenues from
franchised restaurants
|
2,608.0
|
|
2,715.1
|
|
(107.1)
|
|
(4)
|
Other
revenues
|
80.6
|
|
68.5
|
|
12.1
|
|
18
|
|
|
|
|
|
TOTAL
REVENUES
|
4,714.4
|
|
5,024.1
|
|
(309.7)
|
|
(6)
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
Company-operated
restaurant expenses
|
1,752.8
|
|
1,886.2
|
|
(133.4)
|
|
(7)
|
Franchised
restaurants-occupancy expenses
|
554.2
|
|
533.1
|
|
21.1
|
|
4
|
Other restaurant
expenses
|
65.5
|
|
53.3
|
|
12.2
|
|
23
|
Selling,
general & administrative expenses
|
|
|
|
|
Depreciation and
amortization
|
73.5
|
|
61.4
|
|
12.1
|
|
20
|
Other
|
516.3
|
|
437.7
|
|
78.6
|
|
18
|
Other operating
(income) expense, net
|
58.5
|
|
(41.6)
|
|
100.1
|
|
n/m
|
Total operating costs
and expenses
|
3,020.8
|
|
2,930.1
|
|
90.7
|
|
3
|
|
|
|
|
|
OPERATING
INCOME
|
1,693.6
|
|
2,094.0
|
|
(400.4)
|
|
(19)
|
|
|
|
|
|
Interest
expense
|
280.0
|
|
274.1
|
|
5.9
|
|
2
|
Nonoperating (income)
expense, net
|
(31.3)
|
|
(11.4)
|
|
(19.9)
|
|
n/m
|
|
|
|
|
|
Income before
provision for income taxes
|
1,444.9
|
|
1,831.3
|
|
(386.4)
|
|
(21)
|
Provision for income
taxes
|
338.0
|
|
502.9
|
|
(164.9)
|
|
(33)
|
|
|
|
|
|
NET INCOME
|
$
|
1,106.9
|
|
$
|
1,328.4
|
|
$
|
(221.5)
|
|
(17)%
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
1.47
|
|
$
|
1.72
|
|
$
|
(0.25)
|
|
(15)%
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
750.7
|
|
771.6
|
|
(20.9)
|
|
(3)%
|
View original
content:http://www.prnewswire.com/news-releases/mcdonalds-reports-first-quarter-2020-results-301049798.html
SOURCE McDonald's Corporation