The coronavirus pandemic took a bite out of McDonald's profits and the Big Mac maker said on Tuesday it plans to focus on affordability in upcoming marketing campaigns, as US consumer surveys reveal mounting recession fears. But while there is still a lot of uncertainty because of COVID-19, executives expect the second quarter to be the low mark for the year.
The fast food company suffered a 68% drop in profits to US$483.8 million, but the impact was mitigated somewhat by drive-through sales that are becoming a bigger factor, including in European markets.
Chief Executive Chris Kempczinski cautioned that there are a lot of warning signs out there that would suggest the consumer sentiment and consumer concerns about the economy is negative and going in the wrong direction.
The vagaries of the pandemic create an unpredictable operating environment, he said on a conference call with analysts. In many markets around the world, most notably the US, the public health situation appears to be worsening.
The chain saw revenues plunge 30% to US$3.8 billion, but he added that the second quarter would likely be the trough in our performance.
Comparable sales tumbled throughout major markets for the fast food giant, but the US outperformed other regions because of drive-through and takeaway service that continued even where in restaurant dining service was stopped.
The company had trimmed back its advertising spending in the first half of 2020, but had amassed a marketing war chest that it would use the rest of the year.
It's time for us to get back on the front foot, he said. But it also means that we're going to be thinking about the role affordability and value can play.
Kempczinski said McDonald's most recent poll showed economic concerns eclipse public health, public safety concerns.
He did not elaborate on the plan to emphasize value, but the company has often had special combo promotions of a drink, a hamburger and fries at reduced prices, as well as a US$1 menu.
Kempczinski also said sales were boosted by US fiscal spending, including the US$600 a week in additional unemployment payments that are due to expire this week.