CHICAGO, July 28, 2020 /PRNewswire/ -- McDonald's
Corporation today announced results for the second quarter ended
June 30, 2020.
"Throughout our history, McDonald's has demonstrated the
strategic foresight necessary to position our business for the
future. Our strong drive-thru presence and the investments we've
made in delivery and digital over the past few years have served us
well through these uncertain times. We saw continued improvement in
our results throughout the second quarter as markets reopened
around the world," said McDonald's President and Chief Executive
Officer Chris Kempczinski. "I'm
especially proud of the way the McDonald's System continues to
provide a safe environment for both customers and crew, building on
our 65 year legacy as a responsible and reliable choice for safe
food. We're confident that the strong foundation we've built,
combined with the unique advantages of our System, position us well
to continue operating successfully during this pandemic and emerge
even stronger."
Second quarter operational update and financial performance:
- As of June 30, 2020, nearly all
McDonald's restaurants around the world were open to serve
customers.
- Global comparable sales declined 23.9%. The U.S., International
Operated Markets segment and global monthly comparable sales
sequentially improved throughout the second quarter.
- Consolidated revenues decreased 30% (29% in constant
currencies).
- Systemwide sales decreased 24% (23% in constant
currencies).
- Diluted earnings per share was $0.65.
COMPARABLE
SALES*
|
|
|
|
Increase/(Decrease)
|
|
Month
Ended
|
Quarters Ended
June 30,
|
|
April 30,
2020
|
May 31,
2020
|
June 30,
2020
|
2020
|
2019
|
U.S.
|
(19.2)%
|
(5.1)%
|
(2.3)%
|
(8.7)%
|
5.7%
|
International
Operated Markets
|
(66.7)
|
(40.5)
|
(18.4)
|
(41.4)
|
6.6
|
International
Developmental Licensed Markets & Corporate
|
(32.3)
|
(20.0)
|
(20.3)
|
(24.2)
|
7.9
|
Total
|
(39.0)%
|
(20.9)%
|
(12.3)%
|
(23.9)%
|
6.5%
|
|
|
*
|
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.
|
- Comparable Sales: Global comparable sales results
sequentially improved throughout the second quarter of 2020 as
markets reopened restaurants and governments eased
restrictions.
-
- U.S.: Comparable sales results sequentially improved
throughout the second quarter of 2020 and continued to benefit from
strong average check growth. Comparable sales and guest counts
remained negative, particularly at the breakfast daypart.
- International Operated Markets: Comparable sales results
were heavily impacted by temporary restaurant closures and limited
operations, particularly in the U.K. and France. While comparable sales remained
negative in nearly all markets, comparable sales results
sequentially improved throughout the quarter for all markets.
Comparable sales were positive in Australia in May and June driven by strong
drive-thru performance.
- International Developmental Licensed Markets: Comparable
sales results were impacted by temporary restaurant closures across
nearly all geographies, most notably in Latin America. Results also reflected
continued negative comparable sales in China and positive comparable sales in
Japan for the quarter.
KEY FINANCIAL METRICS
- CONSOLIDATED
Dollars in millions,
except per share data
|
|
|
|
Quarters Ended
June 30,
|
Six Months Ended
June 30,
|
|
2020
|
2019
|
Inc/
(Dec)
|
Inc/
(Dec)
Excluding
Currency
Translation
|
2020
|
2019
|
Inc/
(Dec)
|
Inc/
(Dec)
Excluding
Currency
Translation
|
Revenues
|
$
|
3,761.5
|
$
|
5,409.8
|
(30)%
|
(29)%
|
$
|
8,475.9
|
$
|
10,433.9
|
(19)%
|
(17)%
|
Operating
income
|
961.1
|
2,273.9
|
(58)
|
(57)
|
2,654.7
|
4,367.9
|
(39)
|
(38)
|
Net income
|
483.8
|
1,516.9
|
(68)
|
(67)
|
1,590.7
|
2,845.3
|
(44)
|
(43)
|
Earnings per
share-diluted
|
$
|
0.65
|
$
|
1.97
|
(67)%
|
(66)%
|
$
|
2.12
|
$
|
3.69
|
(43)%
|
(42)%
|
Results for the quarter and six months reflected sales
performance declines due to temporary restaurant closures, limited
operations and dramatic changes in consumer behavior as a result of
COVID-19.
Results for the quarter and six months also included the
following:
- Over $200 million of committed
incremental franchisee support for marketing to accelerate recovery
and drive growth across the U.S. and International Operated
Markets.
-
- About $100 million was recorded
in the U.S., with over half of that amount reflected in franchised
margins and the remaining amount reflected in Selling, General and
Administrative Expenses.
- The remaining over $100 million
of support was recorded in Selling, General and Administrative
Expenses in the International Operated Markets segment.
- $31 million of payments to
distribution centers for obsolete inventory to support franchisee
liquidity (reflected in Other Operating (Income) Expenses,
Net).
- An increase in reserves for bad debts of $45 million and $92
million for the quarter and six months, respectively.
- Lower gains on sales of restaurant businesses.
- Lower equity in earnings of unconsolidated affiliates.
Foreign currency translation had a negative impact of
$0.01 and $0.03 on diluted earnings per share for the
quarter and six months, respectively.
Outlined below is additional information for the quarter and six
months ended June 30, 2020:
EARNINGS PER
SHARE-DILUTED RECONCILIATION
|
|
|
|
Quarters Ended
June 30,
|
Six Months Ended
June 30,
|
|
2020
|
2019
|
Inc/
(Dec)
|
Inc/
(Dec)
Excluding
Currency
Translation
|
2020
|
2019
|
Inc/
(Dec)
|
Inc/
(Dec)
Excluding
Currency
Translation
|
GAAP earnings per
share-diluted
|
$
|
0.65
|
$
|
1.97
|
(67)%
|
(66)%
|
$
|
2.12
|
$
|
3.69
|
(43)%
|
(42)%
|
Strategic
charges
|
0.01
|
0.08
|
|
|
0.01
|
0.08
|
|
|
Non-GAAP earnings per
share-diluted
|
$
|
0.66
|
$
|
2.05
|
(68)%
|
(67)%
|
$
|
2.13
|
$
|
3.77
|
(44)%
|
(43)%
|
Results for the quarter and six months 2020 included
$0.01 per share of pre-tax strategic
charges primarily due to the write-off of impaired software that
was no longer being used of $12
million and $26 million,
respectively. The six months was offset by $13 million of income primarily comprised of a
reversal of a reserve associated with the Company's sale of its
business in the India Delhi market in January 2020.
Results for the quarter and six months 2019 included
$78 million of pre-tax strategic
charges, or $0.08 per share,
primarily related to impairment associated with the purchase of our
joint venture partner's interest in the India Delhi market, partly
offset by gains on the sales of property at the former Corporate
headquarters.
Restaurant Update
Below is a summary of the operating status of McDonald's
restaurants around the world as of June 30,
2020. The Company has continued to follow the guidance of
expert health authorities to ensure the appropriate precautionary
steps are taken to protect the health and safety of our people and
our customers.
PERCENT OF OPERATING
RESTAURANTS*
|
|
|
|
|
|
|
As of June 30,
2020
|
|
U.S.
|
|
99%
|
|
International
Operated Markets
|
|
94
|
|
International
Developmental Licensed Markets
|
|
94
|
|
Total
|
|
96%
|
|
|
|
|
* Restaurants include those with limited operations
including drive-thru, delivery, and/or take-away.
|
U.S.:
- Substantially all restaurants were operating drive-thru,
delivery, and/or take-away with a limited menu. Limited hours also
applied.
- About 2,000 restaurant dining rooms reopened with reduced
seating capacity.
International Operated Markets:
- All markets were operating with drive-thru and delivery (where
available) with limited menus and hours.
- Some markets were operating take-away and/or dine-in with
reduced seating capacity.
International Developmental Licensed Markets:
- Substantially all restaurants in China and Japan were operating with reduced seating
capacity for dine-in.
- Latin America was the
geography with the most restaurants closed.
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 and six months
ended June 30, 2020.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 7:30 a.m. (Central Time) on July 28, 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.
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 about 39,000 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 COVID-19
pandemic and our responses thereto 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 July 28, 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
June 30,
|
2020
|
2019
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
1,593.7
|
$
|
2,400.4
|
$
|
(806.7)
|
(34)%
|
Revenues from
franchised restaurants
|
2,088.0
|
2,940.9
|
(852.9)
|
(29)
|
Other
revenues
|
79.8
|
68.5
|
11.3
|
16
|
|
|
|
|
|
TOTAL
REVENUES
|
3,761.5
|
5,409.8
|
(1,648.3)
|
(30)
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
Company-operated
restaurant expenses
|
1,448.4
|
1,967.1
|
(518.7)
|
(26)
|
Franchised
restaurants-occupancy expenses
|
524.5
|
544.7
|
(20.2)
|
(4)
|
Other restaurant
expenses
|
63.3
|
55.4
|
7.9
|
14
|
Selling,
general & administrative expenses
|
|
|
|
|
Depreciation and
amortization
|
71.0
|
63.2
|
7.8
|
12
|
Other
|
576.0
|
469.9
|
106.1
|
23
|
Other operating
(income) expense, net
|
117.2
|
35.6
|
81.6
|
n/m
|
Total operating costs
and expenses
|
2,800.4
|
3,135.9
|
(335.5)
|
(11)
|
|
|
|
|
|
OPERATING
INCOME
|
961.1
|
2,273.9
|
(1,312.8)
|
(58)
|
|
|
|
|
|
Interest
expense
|
319.1
|
284.2
|
34.9
|
12
|
Nonoperating (income)
expense, net
|
(6.7)
|
(18.1)
|
11.4
|
63
|
|
|
|
|
|
Income before
provision for income taxes
|
648.7
|
2,007.8
|
(1,359.1)
|
(68)
|
Provision for income
taxes
|
164.9
|
490.9
|
(326.0)
|
(66)
|
|
|
|
|
|
NET INCOME
|
$
|
483.8
|
$
|
1,516.9
|
$
|
(1,033.1)
|
(68)%
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
0.65
|
$
|
1.97
|
$
|
(1.32)
|
(67)%
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
748.6
|
768.7
|
(20.1)
|
(3)%
|
McDONALD'S
CORPORATION
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
Six Months Ended
June 30,
|
2020
|
2019
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
3,619.5
|
$
|
4,640.9
|
$
|
(1,021.4)
|
(22)%
|
Revenues from
franchised restaurants
|
4,696.0
|
5,656.0
|
(960.0)
|
(17)
|
Other
revenues
|
160.4
|
137.0
|
23.4
|
17
|
|
|
|
|
|
TOTAL
REVENUES
|
8,475.9
|
10,433.9
|
(1,958.0)
|
(19)
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
Company-operated
restaurant expenses
|
3,201.2
|
3,853.3
|
(652.1)
|
(17)
|
Franchised
restaurants-occupancy expenses
|
1,078.7
|
1,077.8
|
0.9
|
0
|
Other restaurant
expenses
|
128.8
|
108.7
|
20.1
|
18
|
Selling,
general & administrative expenses
|
|
|
|
|
Depreciation and
amortization
|
144.5
|
124.6
|
19.9
|
16
|
Other
|
1,092.3
|
907.6
|
184.7
|
20
|
Other operating
(income) expense, net
|
175.7
|
(6.0)
|
181.7
|
n/m
|
Total operating costs
and expenses
|
5,821.2
|
6,066.0
|
(244.8)
|
(4)
|
|
|
|
|
|
OPERATING
INCOME
|
2,654.7
|
4,367.9
|
(1,713.2)
|
(39)
|
|
|
|
|
|
Interest
expense
|
599.1
|
558.3
|
40.8
|
7
|
Nonoperating (income)
expense, net
|
(38.0)
|
(29.5)
|
(8.5)
|
(29)
|
|
|
|
|
|
Income before
provision for income taxes
|
2,093.6
|
3,839.1
|
(1,745.5)
|
(45)
|
Provision for income
taxes
|
502.9
|
993.8
|
(490.9)
|
(49)
|
|
|
|
|
|
NET INCOME
|
$
|
1,590.7
|
$
|
2,845.3
|
$
|
(1,254.6)
|
(44)%
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
2.12
|
$
|
3.69
|
$
|
(1.57)
|
(43)%
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
749.6
|
770.2
|
(20.6)
|
(3)%
|
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SOURCE McDonald's Corporation