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McDonald’s ends a tough year on a strong note

The burger chain’s U.S. same-store sales rose 5.5% and finished positive for the year despite the pandemic.
McDonald's earnings
Photograph: Shutterstock

McDonald’s finished 2020 on a strong note, as the company’s marketing strategies turned out customers who flocked to the chain’s drive-thrus.

U.S. same-store sales rose 5.5% in the fourth quarter ended Dec. 31 and rose 0.4% for the full year, meaning an end-of-year surge thanks to a series of new product offerings and marketing moves helped the company recover sales lost because of the pandemic.

“2020 will be remembered as one of McDonald’s most challenging, yet inspiring, moments in our long history,” CEO Chris Kempczinski said in a statement.

The improvement continued into 2021, too. Executives said on Thursday that same-store sales in the U.S. are expected to be up in the “high single digits.” CFO Kevin Ozan said the month’s sales were helped by “consumers receiving stimulus checks.”

To be sure, the Chicago-based burger giant faced its challenges. Global same-store sales fell 1.3% in the fourth quarter as restrictions and a lack of drive-thrus in many international markets prevented the same sort of recovery the chain felt in the U.S. Global systemwide sales fell 7% to $93 billion.

Profitability was also challenged. Earnings per share fell 14% to $1.70, below investors’ expectations, and for the full year fell 20% to $6.31.

Much of that was due to McDonald’s heavy spending to keep stores from closing in the aftermath of the pandemic and to accelerate the chain’s recovery. The company spent $200 million on incremental marketing last year—spending that helped yield sales-boosting efforts such as the Travis Scott Meal, which helped sales surge in September.

Still, the end-of-year recovery made for the sixth straight year of positive same-store sales in the U.S., something that would have been almost unthinkable in March when states closed dining rooms and sales plunged.

What’s more, the company said its same-store sales were up last quarter in all dayparts, including breakfast, which had been among the most challenged dayparts during the pandemic as consumers worked from home, reducing key commuter traffic.

McDonald’s drive-thrus in the U.S. largely fueled the company’s comeback—its dining rooms were largely closed for most of 2020 even after states allowed them to reopen. Even before the pandemic, 70% of the chain’s sales came through that lane.

McDonald’s did finish the year with fewer U.S. locations as it more aggressively closed locations that no longer fit with its business model, such as some urban locations or stores inside of Walmart retailers. The company closed a net of 164 restaurants in 2020 and now operates 13,682 in its home market.

But it added more than 500 worldwide as the company continued to open restaurants in many international markets, especially China, where it opened 400 restaurants. McDonald’s now operates 39,198 restaurants worldwide.

Franchisees, meanwhile, made more money. Operator cashflow in the U.S. last year hit an all-time high, Kempczinski said, increasing by nearly $40,000 per store. Over the last three years, he said, they’ve increased more than $100,000.

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