The coronavirus shutdown hit McDonald’s during an otherwise strong start to 2020, leading to widespread global closures, cuts in capital spending and executive pay and ramped-up assistance to franchisees who have seen a shocking turn of fortunes this year.
Same-store sales were up 8.1% in the U.S. in January and February, likely prompted by a combination of good weather and the chain’s continued plans to bolster customer spending. That put the Chicago-based burger giant on pace for its best quarter in eight years.
Closures of dine-in service in March to stem the spread of COVID-19 stopped all of that. Same-store sales declined 13.4% in the U.S., though the true figure is likely considerably higher given that most of the sales problems occurred in the latter half of the month.
“The current situation has had a significant impact on our business,” CEO Chris Kempczinski said in a message to the system Wednesday. “We entered 2020 in a strong position, but of course the world has since changed. While our January and February global comparable sales were strong, changes in consumer behavior and the various restrictions in place by governments around the world have led to a significant decline in sales.”
Globally, same-store sales fell from a 7.2% increase to a decline of 22% in March.
Much of that slowdown is coming from widespread global closures. McDonald’s said 75% of its worldwide restaurants are open, including 99% in the U.S., though in most cases are restricted to drive-thru, delivery and takeout.
But that suggests nearly 9,700 McDonald’s locations around the world are closed. That includes all restaurants in Spain, Italy, the United Kingdom and France.
In China, where the coronavirus pandemic began, operations have resumed in 98% of its restaurants. But, the company said, “the market continues to experience a reduced level of demand as consumers have not fully returned to their pre-COVID routines.”
That note could be viewed as a caution for the rest of the world that consumers could be slow to return to restaurants once everything reopens.
McDonald’s has deferred rent and royalty collection in all of its markets to help franchisees, and the company said it is working with suppliers and lenders to extend operators’ payment terms.
McDonald’s also said it plans to reduce capital spending by $1 billion, with fewer remodel projects in the U.S. and fewer restaurant openings around the world. The company secured $6.5 billion in new financing in the first quarter.
“We are taking a disciplined approach to all decision-making, including reviewing all investments and reducing our spending where possible,” Kempczinski said. “We will continue to operate with a long-term mindset, even if that means making decisions that feel difficult in the here and now.”
Kempczinski is taking half of his salary, while several members of the executive team have offered to have their salaries cut by 25% from April 15 through Sept. 30. The executives agreeing to cuts include Joe Erlinger, president of McDonald’s USA, CFO Kevin Ozan, International President Ian Borden and General Counsel Jerry Krulewitch.
Kempczinski said the company is working to prepare itself for “the reality of a post-COVID-19 world.”
“While we’re not sure what a post-COVID-19 world looks like yet, one thing I do know for certain is that we will keep innovating to elevate the experience of our customers and our crew,” Kempczinski said. “And against that backdrop, our purpose remains unwavering: to feed and foster communities.”
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