Citing a steep decline in sales beginning in March, McDonald’s said Wednesday it is withdrawing its earnings estimates for 2020 and tapping credit lines to stabilize its balance sheet. Top executives are taking pay cuts, the company reported.
Business disruption from COVID-19 also has led the company to cancel a share repurchase program and to slash capital expenses by about $1 billion, or about 40%, for 2020, said CEO Chris Kempczinski.
“While we are faced with new challenges as a result, we are drawing on the strengths of our global system to manage through the crisis and position us for long-term growth,” he said. “This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath.”
The Chicago-based fast food giant said worldwide sales at comparable locations fell 3.4% during the first quarter. While sales were up in January and February, they fell 22.2% in March as the pandemic took hold in many countries. The March decline was 13.4% in the U.S.
McDonald’s said 75% of its global restaurants are operating, including 99% in the U.S., almost all of which are on a delivery- or takeout-only basis. It also said 98% of outlets in China have reopened, although sales are sluggish because people have yet to return to normal routines.
Kempczinski has volunteered to take a 50% cut in his base salary, the company said, while other leading executives are taking a 25% reduction from April 15 to Sept. 30, extendable if the crisis warrants.
Kempczinski’s last reported base salary was $725,000 in 2018, when he was president of McDonald’s U.S. operations.
The company said across all markets it is deferring collections of some rent and royalties from franchisees.
It also said it has secured $6.5 billion in new financing, including a draw of $1 billion on a line of credit that has $3.5 billion remaining.
“We are implementing measures across markets to keep customers and crew safe, such as contactless drive-thru and delivery, social distancing guidelines, protective equipment for crew and enhanced hygiene and cleaning procedures, “ Kempczinski said. “We will continue to work with franchisees around the world to evaluate operational feasibility.”