Evaluate the Mcodonalds current financial situation and financial plans, make your recommendations for improvement.

 

(Question) Evaluate the Mcdonalds current financial situation and financial plans, make your recommendations for improvement.

Answer:

The current financial situation of McDonald is in the recession period since the start of the pandemic. With that, McDonald's on year 2020 said its first-quarter earnings fell 17% as the coronavirus pandemic led to restaurant closures and plunging sales. Here are evaluation of each account of the financial statement of Mcdonald from its current financial statement. 

Sales trends are showing signs of improvement in some markets, like the United States, but executives expect steeper global same-store sales declines in the second quarter than in March. 

"It's really a country-by-country situation," CEO Chris Kempczinski said on CNBC's "Squawk on the Street."

Shares of the company fell 2.6% in premarket trading.

Here's what the company reported for the quarter ended March 31:

• Earnings per share: $1.47
• Revenue: $4.71 billion

The global fast-food chain reported fiscal first-quarter net income of $1.11 billion, or $1.47 per share, down from $1.33 billion, or $1.72 per share, a year earlier.

Net sales dropped 6% to $4.71 billion as the company observed "dramatic changes in consumer behavior" stemming from the pandemic.

Wall Street anticipated earnings per share of $1.57 on revenue of $4.65 billion, based on a survey of analysts by Refinitiv. However, it's difficult to compare reported earnings to analyst estimates for McDonald's quarter, as the coronavirus pandemic continues to hit global economies and makes earnings impact difficult to assess.

McDonald's reported global same-store sales declines of 3.4% in the first three months of the year after shelter-at-home orders and social distancing measures took a toll on sales in March. 

In the U.S., quarterly same-store sales were nearly flat after March same-store sales plunged 13.4%. The company has made tweaks to its U.S. menu, including pulling all-day breakfast, to simplify operations within restaurants. About 99% of U.S. restaurants are open, as of Thursday, but nearly all are operating drive-thru, delivery and takeout only.

U.S. same-store sales fell 25% from mid-March to through mid-April, but trends in McDonald's home market are improving. The company estimates April same-store sales declines of 20% in the U.S as average check increases. 

"This is due to an increase in party size, as well as evolving consumer behavior, with daily routines interrupted and fewer transactions at the breakfast daypart," Kempczinski told analysts on the conference call.

In McDonald's international operated markets segment, which includes France, Spain and Italy, less than half of restaurants are open. The segment saw quarterly same-store sales contract 6.9% in the quarter. In April, the segment's same-store sales are down about 70%, continuing trends from the second half of March as locations remain closed. 

The company's international developmental licensed markets business, which includes Brazil and Japan, is faring better, with 80% of locations operating. About 99% of Chinese restaurants have reopened, but the company said demand is down because consumers have not fully resumed their routines prior to the crisis. The segment's quarterly same-store sales fell 4.3%.

Reopened markets will have limited menus, with a focus on core menu items like Big Macs and McNuggets. The company said customers are looking for familiarity, cheap deals and convenience. Some markets, like France and Austria, have seen pent-up demand resulting in long drive-thru lines as restaurants reopen.

McDonald's has withdrawn its 2020 outlook and long-term forecast issued in February, citing the uncertainty related to the coronavirus pandemic and its impact on the economy. The chain previously expected earnings per share growth in the high single digits and systemwide sales growth in a range of 3% to 5%.

As part of my recommendation is to reopen all the extended branches across countries to increase its sales and decrease it fixed cost per unit as it will benefit the company as a whole.