McDonald’s says this quarter’s same-store sales will be worse. Here’s why

McDonald’s is expecting steeper same-store sales declines in the second quarter as international restaurant closures due to the coronavirus pandemic continue to weigh down sales.

McDonald’s global same-store sales shrank 3.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in the first three months of the year after plunging 22{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in March.

“Looking at comparable sales, we expect the second quarter as a whole to be significantly worse than what we experienced for the full month of March,” CEO Chris Kempczinski told analysts on the conference call.

More than half of restaurants in McDonald’s international operated markets segment, which includes France and Australia, are closed. Four countries in the segment — the United Kingdom, Spain, Italy and France  — have closed down restaurants entirely to slow the spread of the virus. In April, the segment’s same-store sales are down about 70{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. 

Kempczinski said on CNBC’s “Squawk on the Street” that it is difficult to generalize how the company is recovering as countries in Europe and Asia allow restaurants to reopen. 

Locations in France and Austria are showing signs of pent-up demand as they reopen with miles-long drive-thru lines. But in China, where 99{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of restaurants are open, consumers have been slower to resume their old habits, with same-store sales still declining by mid-teens. 

“It’s really a country-by-country situation because each country’s going through a different level of opening, each country has a different consumer psychology,” Kempczinski said. 

In the United States, same-store sales are showing signs of improvement. From mid-March to mid-April, sales at locations open at least a year tumbled 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, but McDonald’s estimates that April’s same-store sales only fell 20{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. 

Shares of McDonald’s dropped 2{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in morning trading after the company reported first-quarter earnings, which fell 17{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} compared to a year ago. The stock, which has a market value of $141 billion, has fallen 7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} so far this year.