With new lockdown restrictions in place in the U.K., McDonald's Corporation MCD recently announced that it is stopping walk-in takeaway services. The company has also temporarily halted dine-in services.
The company has nearly 1,300 restaurants across the U.K. However, its stores will remain open during the lockdown but with a few alterations. McDonald's announced restaurants across the U.K and Ireland will be open for drive-thru and McDelivery.
The impact of coronavirus outbreak is likely to get reflected in the company’s results in the coming quarters. Due to a rise in COVID-19 cases (since September), there has been an increase in government restrictions on operating hours, limited dine-in capacity and mandated dining room closures (in some cases).
With increase in coronavirus cases, the company is likely to witness dismal comps and traffic in fourth-quarter 2020. The company’s comps declined for the third straight quarter after reporting positive comps in the preceding 19 quarters. In the third quarter, global comps declined 2.2% against a gain of 5.9% in the prior-year quarter. In second-quarter 2020, comps were down 23.9%.
Shares of the company have gained 13.6% in the past six months, compared with the industry’s rally of 22.2%.
Digitalization: A Major Growth Driver
Amid the coronavirus pandemic the company has been focusing on drive-thru, delivery and take-away. Prior to the coronavirus outbreak, drive-thru accounted for about two-thirds of all sales in the United States. Drive-thru now accounts for approximately 90% of sales. Moreover, McDonald’s continues to roll out mobile order and pay, with a new curbside check-in option. To provide enhanced experience and convenience to customers, the company has been increasingly focusing on delivery. It provides delivery from more than 28,000 restaurants in above 75 countries. In third-quarter 2019, it partnered with Grubhub for the rollout of McDelivery to nearly 500 restaurants in the NYC and Tri-State area. It has also collaborated with DoorDash.
During third-quarter 2020, strong drive-thru and delivery sales got reflected in Australia sales despite restricted operating conditions due to a rise in COVID-19 cases. Notably, the majority of the orders came from digital channels such as mobile app and self-order kiosks. Also, solid comps were witnessed in Japan.
Zacks Rank & Key Picks
McDonald’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Yum China Holdings, Inc. YUMC, The Wendy's Company WEN and Yum! Brands, Inc. YUM, each carrying a Zacks Rank #2 (Buy).
Yum China, Wendy's and Yum! Brands have a three-five year earnings per share growth rate of 9%, 12.6% and 12.3%, respectively.
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McDonalds Corporation (MCD) : Free Stock Analysis Report
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