McDonald’s cutting about $1 billion in spending

McDonald’s is slashing spending and has withdrawn its 2020 outlook and long-term forecast amid the uncertainty due to the COVID-19 pandemic and its impact on the economy.

In a business update, the company said it expects to reduce capital expenditures by approximately $1 billion for 2020 as a result of fewer new restaurant openings and renovations around the world. McDonald’s CEO Chris Kempczinski will cut his salary in half, until at least Sept. 30, and four of McDonald’s top executives have volunteered to reduce their salaries by 25% through the same time period. 

McDonald’s said that about 75% of its restaurants around the world are operational, the majority of which have adapted to focus on drive-thru, delivery, and/or take-away. Several markets, such as France, Italy, Spain and the United Kingdom, have fully closed all restaurants.

McDonald’s global same-store sales fell 22% in March. (Full-service restaurants saw their transactions decline 79% during the same period, according to the NPD Group.) The chain pivoted to delivery, takeout and drive-thru only in the United States in mid-March. 

The company withdrew its 2020 outlook and long-term forecast. It had previously expected earnings per share growth in the high single digits and systemwide sales growth in a range of 3% to 5%. 

McDonald’s is working with its global franchisees to support financial liquidity during the pandemic. The company has granted the deferral of cash collection for certain rent and royalties earned from franchisees in substantially all markets. Additionally, the company said it is working with suppliers and lenders to extend franchisee payment terms when possible. 

“The world is going through a historic event, with profound consequences for McDonald’s, for the restaurant industry and for humanity at large,” Kempczinski stated in a letter to the McDonald’s system. “We’re learning more about this situation by the day, and over the coming weeks and months, we’ll better understand the enduring consequences it presents. But I remain confident in our future because we have the right purpose, values, and most importantly, people, to help us emerge from this challenging time with strength.”