Retail

McDonald's Loses Its Edge

Douglas A. McIntyre

Published: July 5, 2020 7:23 am

McDonald’s Corporation (NYSE: MCD) had an edge over many retailers. Its locations were open longer than many other retailers over the early wave of the pandemic. People who did not want to shop at stores became fast food buyers. McDonald’s meals were cheap. However, these advantages have started to disappear. Shares in the company have dropped 7% this year, while the S&P 500 is off less than 4%.

McDonald’s food price advantages remain. People can get a full meal for $10 to $15. But, the new surge in the spread of COVID-19 has caused it to keep store hours short. The delay in openings will probably stretch another three weeks. People can pick-up at drive-throughs, but that means a drop in revenue, which could be substantial.

In the first two months of the second quarter, global sales dropped by 30%.

McDonald’s continues to have the fast-food edge in store count. It has almost 14,000 locations in the U.S. But, if they are not open some of that advantage is lost.

As McDonald’s announced its drop in April and May sales, CEO Chris Kempczinski said: “Our strong foundation and the unique advantages of the McDonald’s System, including a high percentage of drive-thru restaurants and investments in delivery and digital, have enabled us to adapt to the changing landscape presented by the COVID-19 outbreak. I am confident in our ability to manage through the immediate challenges and emerge from this pandemic in a position of competitive strength.”

However, the pandemic is worsening. No matter what advantages McDonald’s has over the competition only goes so far, under the circumstances.