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2 Bright Spots in McDonald's Monthly Sales Trends

By Demitri Kalogeropoulos – Jun 17, 2020 at 8:40AM

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April was a brutal month for the fast-food giant, but then things started getting better.

McDonald's (MCD -0.80%) is still struggling with weaker sales across most of its selling footprint as a result of the COVID-19 pandemic. Investors got a detailed look at the depth of that slump -- and the first official signs of a rebound -- on Tuesday when the fast-food giant revealed monthly revenue data for April and May.

The operating update showed that demand trends worsened significantly in the early weeks of the fiscal second quarter, which started on April 1. But there was more good news than bad news for investors in the announcement.

Four young friends eating fast food.

Image source: Getty Images.

Tracing the COVID-19 impact

CEO Chris Kempczinksi and his team said in late April that comparable-store sales, or comps, dropped 13% in the U.S. in March and fell 22% overall due to the restaurant closures that began in February in China and quickly spread across the globe through March. Tuesday's report filled in some holes in that picture by showing sales trends in both April and May.

Things got far worse in April when maximum social distancing efforts were taking place around the world. Comps fell 19% that month in the U.S., management said, and dove 39% worldwide.

At home, almost all the chain's domestic stores remained opened but kept limited hours and operated only on drive-through and to-go orders. Yet more than half of its international locations were fully closed that month, including all McDonald's locations in France, Italy, Spain, and the U.K.

Brighter days

The good news is that trends started improving sharply in May. Comps accelerated to a 5% decline in the U.S. that month from the 19% drop in April. Overall, comps declines landed at 21% compared to 39% a month earlier. "Our strong foundation and the unique advantages of the McDonald's system, including a high percentage of drive-thru restaurants," Kempczinski said, "have enabled us to adapt to the changing landscape presented by the COVID-19 outbreak." The chain also cited its booming digital business as a key strength during the crisis.

McDonald's said that, as of June 15, 90% of its international stores are open, up from 85% two weeks earlier and 80% at the end of May.

The other positive sign from the report is that the burger giant is seeing rising average spending per order today. That success is helping offset a persistent drop in customer traffic, especially during the breakfast hours.

Looking ahead

That pressure on breakfast might linger for a while, especially as densely populated metropolitan areas continue to encourage most employees to work from home. McDonald's also noted a major financial drag from some of its hardest-hit franchisees, and it plans to support them through temporary aid measures like deferred rent and royalty payments and an increased corporate contribution to the company's advertising fund.

Yet the latest trends imply that comps for the second quarter, while likely far worse than the 3.4% decrease the company reported in late April, will be a bit better than the 30% slump McDonald's has seen in the 10-week period that runs through mid-June.

Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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