McDonald’s Corp. (NYSE: MCD) has been feeling the sting of COVID-19, much like the rest of the restaurant industry. To get out ahead of it (at least as much as McDonald’s can), the company provided an update on its operations going into this earnings season.
Management noted that January and February global comparable sales were strong in most countries. However, beginning in mid-March, the company experienced a significant decline in results that varies across markets. The variation reflects the different levels of consumer behavior and government response. The situation remains fluid, and management believes that it is not possible to estimate the full extent of the impact on business at this time.
As a result, McDonald’s suspended its share repurchase program and increased its cash position by raising $6.5 billion in the debt markets during the first quarter. Additionally, management plans to reduce capital expenditures this year as a result of fewer Experience of the Future projects across the United States and a reduced number of new restaurant openings in most markets around the world.
In terms of the actual numbers, total comparable sales increased 7.2% in the first two months of the quarter, but they decreased 22.2% in March. As a result, the company is looking for comparable sales to decrease 3.4% for the whole quarter. In the same period of last year, the company reportedly saw comparable sales increase by 5.4%.
Another measure McDonald’s is taking to combat COVID-19 is executive pay reduction. The chief executive officer has voluntarily offered a 50% reduction in his base salary and other named executives are offering a 25% reduction.
Also, the company is withdrawing the 2020 and long-term outlooks it issued on February 26, 2020. Management said that it will provide an update on business and financial results when it reports its first-quarter results on April 30.
Chris Kempczinski, president and CEO, commented:
This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath. One thing that has not changed, however, is McDonald’s focus on protecting the health and safety of our people and our customers. We are implementing measures across markets to keep customers and crew safe, such as contactless Drive-thru and Delivery, social distancing guidelines, protective equipment for crew and enhanced hygiene and cleaning procedures.
McDonald’s stock was relatively flat at $175.53 on Wednesday, in a 52-week range of $124.23 to $221.93. The consensus price target is $202.89.
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