After reporting its worst financial quarter in 13 years, McDonald's announced that it will close about 200 locations across the U.S. by the end of 2020. The fast-food giant is citing the coronavirus pandemic as a leading factor in its plummeting sales. The company expects these 200 closures to be permanent.
McDonald's showed a 30 percent drop in revenue in the second quarter of 2020, according to a report by Business Insider. Across the world, same-store sales dropped by about 23.9 percent, totaling $3.76 billion. In response, it is closing about 200 locations a little more than 100 of which are located inside of Walmart stores. While making the announcement, McDonald's CEO Chris Kempczinski noted that the "public health situation seems to be worsening" in the United States.
McDonald's closed its dining rooms all around the world when the coronavirus pandemic hit, and in some countries including Spain, France and the U.K., it temporarily closed locations altogether. It has struggled to make up the difference via drive-thru orders — especially when so many people are staying home more often. Even delivery services like DoorDash, Uber Eats and GrubHub could not make up the difference.
In an earnings call on Tuesday, Kempczinski noted that McDonald's sales have been improving sequentially throughout the second quarter, though there is still a long way to go. Analysts hoped to see McDonald's earn about 74 cents per share over the last few months, but instead it averaged about 66 cents per share. The company's total net income landed around $483.8 million, making this its lowest-earning quarter in 13 years.
Kempczinski said that he believes this will be the low point of the company's battle against the economic recession caused by the coronavirus pandemic. He highlighted how the company has shifted its day-to-day operations to cope with this new status quo, and pinned his hopes on big investments in advertising.
Meanwhile, the closures in the U.S. will be more than balanced by new restaurants opening in other parts of the world. McDonald's reportedly still intends to open about 950 new locations by the end of 2020, including 400 in China. Around 270 of these new restaurants will be company-owned, while the rest will be franchises. This ambitious growth plan will cost the company about $500 million.
This will do little for the fast food workers laid off here in the U.S., of course. According to a report by Forbes, about 20 percent of the American workforce is currently unemployed. With 200 McDonald's stores closing, that number may creep even higher.