McDonald’s says some pandemic consumer trends could linger

An employee wearing protective gloves handles an order at a prototype fast-food giant McDonald’s location for restaurants that adhere to the 6-foot social distance measure.

Piroschka van de Wouw | Reuters

McDonald’s is seeing some trends in consumer behavior reverse as blockages are reduced, but the fast-food giant believes that higher delivery orders and other buying patterns will continue long after the coronavirus pandemic.

The company reported its second quarter results on Tuesday. Shares fell 2.1% in morning trading after he said revenue fell 30% during the three months ended June 30.

McDonald’s executives said their average order was higher, but the total number of customers decreased during the quarter. As traffic levels improve, the order size decreases.

“Part of this was due to the mix, so they saw that delivery became a much more pronounced part of the mix during the second quarter,” CEO Chris Kempczinski told analysts.

In Australia, delivery accounted for almost 10% of sales, doubling its prior contribution to the sales mix. US delivery has not yet reached those heights, though it increased during the quarter.

“In terms of enduring behavior, I think whether it’s the use of kiosks, the use of mobile devices, the use of delivery, the use of the disk drive, certainly one of the things is that customers are looking more for a type of contactless device experience, “Kempczinski said. “They are looking for more than one type of digital experience, one that they can navigate on their own.”

In addition to more digital deliveries and orders, consumers also used drive-thru more than usual. In the United States, almost 90% of sales came from its car lanes. CFO Kevin Ozan said markets with a higher percentage of drive-thru lanes were recovering faster.

But locations near shopping malls, city centers, or travel destinations are under increased pressure as tourism, indoor shopping, and working from office buildings fall out of favor with consumers. Weekend sales have fallen below pre-pandemic levels, but midweek business has been quicker to recover.

In the United States, breakfast is still the most difficult time of day. Consumers are making their meals early in the morning, opting for frozen cereals and waffles on a trip to McDonald’s. Still, executives said the chain increased its market share during the quarter, which could mean that some new customers will continue to buy their Egg McMuffins even after they resume their previous routines.

The economy also plays a role in consumer behavior, and McDonald’s is looking to use value and affordability deals to gain an advantage over the competition.

“As you enter a potentially more recessive type of environment in several major markets, having good accessibility and making sure that’s a key component of your marketing mix is ​​really important,” said Kempczinski.

Kempczinski said the expiration of higher unemployment benefits would likely have a negative impact on McDonald’s business. Senate Republicans have proposed cutting additional aid from $ 600 per week to $ 200 per week. Kempczinski said he couldn’t predict what the impact of that plan would be on sales.