McDonald’s Reports Biggest Earnings Miss in 30 Years

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Revenues Fall By 30%

Shares in US restaurant chain McDonald’s Corporation are trading 2.5% lower pre-market on Wednesday. This comes following a weak set of Q2 earnings yesterday.

McDonald’s reported earnings per share of $0.66 versus estimates of $0.74. This marked its largest earnings miss in thirty years.

Revenues reportedly came in at $3.77 billion. While this was slightly higher than the $3.68 billion expected, it is down around 30% from the prior quarter. This is a reflection of the drop-in demand over the period.

The COVID-19 crisis is the main downward pressure on earnings. McDonald’s had to temporarily close all of its stores around the country at the height of the pandemic and has yet to fully re-open all of its locations.

The chain has said that, as a result, some sites will be closed permanently. In fact, the company is planning to close 200 locations for good by year-end.

Speaking alongside the release, McDonald’s CEO Chris Kempczinski said:

“In many markets around the world, most notably in the U.S., the public health situation appears to be worsening. Nonetheless, I believe that Q2 represents the trough in our performance as McDonald’s has learned to adjust our operations to this new environment.”

Partial Reopening Underway

The company noted that outside of the US, restaurant closures had been a big drag on sales. That said, over 90% of stores had regained at least partial operations by the end of the quarter.

Mcdonald’s CFO Kevin Ozan said that US same-store sales were expected to bounce back and be slightly positive in July. Same-store sales were down 19.2% in April but were only down 2.3% in June.

In terms of food sectors, Ozan noted that breakfast continues to be the most challenging meal for McDonald’s. However, he noted that the company continues to steal market share from competitors.

In terms of global same-store sales, McDonald’s noted a 23.9% reduction. The company’s international-operated market segment, which includes France and the UK, saw a more than 60% decline in April. This was followed by an 18.4% decline in June.

Japan Records Growth

The company’s international developmental-licensed-markets segment, including Brazil and China, was lower by 32.3% in April. This was followed by a 20% drop in May and a 20.3% fall in June.

However, one country that did see a positive result was Japan, which recorded positive sales growth for Q2.

McDonald’s noted that the company plans to gradually divest part of its 49% stake in McDonald’s Japan as a result of the success experienced there in recent years.

Mcdonald’s Held Up At Resistance Level

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Shares in McDonald’s continue to trade within the longer-term bullish channel regardless. The bullish bias is supported above the bearish trend line from the previous 2020 highs. For now, the price remains capped by the resistance at the 201.98 level, where it has formed a double top. However, while it holds above the 190.46 support, the focus remains on further upside in the near term.

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