McDonalds Withdraws Outlook, March Sales Plummet After “Unprecedented” Disruption In Business

While it is hardly a secret that traditional brick and mortar retailers, already in pain after years of Amazon market share theft, were on death’s door as a result of the coronavirus economic coma, until now quick serve restaurants were seen as doing relatively well as a result of the surge in delivery and drive-thru sales. Alas, for McDonalds it wasn’t enough, and on Wednesday the world’s biggest hamburger chain announced that the outbreak of coronavirus has reversed what had been strong sales growth, prompting the world’s largest fast-food chain to withdraw its guidance for the year as a result.

McDonalds comp store sales declined 3.4% in the first quarter, McDonald’s said blaming the “unprecedented situation” as the coronavirus outbreak “has significantly disrupted the McDonald’s business”, with the entire drop due to a measure plunging a whopping 7.2% in March after rising the prior two months, even though the company said 99% of its U.S. restaurants remain open, mostly via drive-thru, delivery and carryout.

Following our strong performance in 2019 through execution of the Velocity Growth Plan, we began 2020 with positive global momentum. More recently, the global outbreak of COVID-19 has significantly disrupted the McDonald’s business. While we are faced with new challenges as a result, we are drawing on the strengths of our global System to manage through the crisis and position us for long-term growth.

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.

The company shelved the outlook it provided on Feb. 26 “due to the uncertainty related to Covid-19 and its impact on the global economic conditions and the company’s business operations.” The Company said it would provide an update on its business and financial results on its first quarter earnings call planned for April 30, 2020.

With measures to limit the pandemic severely curtailing restaurant operations, consumer behavior has shifted drastically practically overnight, sparking upheaval in the restaurant industry. McDonald’s said it is working with its franchisees “to support financial liquidity during this time of uncertainty.” It’s deferring payment of some rent and royalty payments and working with suppliers and lenders to extend franchisee payment terms “when possible.”

Despite the unexpected and sharp drop in sales, McDonald’s shares fell less than 1% in early trading after the announcement, and have since recovered most losses.