Charting Great Digital Shift Through Earnings –

Earnings season is a four-times-a-year scorecard for publicly traded companies. It’s a time for CEOs and CFOs to discuss where they’ve been – and where they are headed.

Yes, GDP was down by a staggering 32 percent, a headline that shows the continued ravages of the pandemic and stubbornly high unemployment.

But drill down a bit into individual company reports, and evidence of the great digital shift continues across a variety of verticals. It’s a shift that is likely permanent – as shown in PYMNTS’ own research, consumers won’t feel comfortable venturing fully out into brick-and-mortar world until well into next year. As a result, we are living life increasingly through electronic means.

To be sure, how we pay has been changing, moving toward card-not-present transactions and commerce done via bits and bytes. Mastercard, for example, said this past week that 70 percent of consumers plan to increase, or at least continue, online purchasing in a post-pandemic world, and 60 percent plan to use cash less often once the coronavirus is conquered. (In terms of in-person transactions, Mastercard said contactless transactions made up 37 percent of in-person transactions, up from 28 percent seen last year). Visa, for its part, said that card-not-present transactions surged 25 percent every week since the beginning of April.

QSRs’ Quickening Digital Pivot

To get a sense of how things are changing, particularly on the QSR front, McDonald’s has focused on what management termed (on the latest earnings call) “the 3Ds” – namely, drive-through, delivery and digital. Mickey D’s saw its revenues slide by 30 percent in the second quarter, as measured year over year, to $3.8 billion.

“They’re looking for more of a digital type of experience, one that they can navigate on their own,” CEO Chris Kempczinski said on the earnings call.

As many as 90 percent of the QSR’s sales in the U.S. were done via drive-through as consumers opt for a contactless option.

(Similarly, as evidence of consumers’ willingness to order and make the trek to pick up food in person, Chipotle said digital pickup and delivery orders comprised 61 percent of sales.)

“Delivery [was] becoming a much more pronounced part of the mix during Q2,” Kempczinski told analysts, noting elsewhere on the call that “in terms of enduring behavior, I think whether it’s the use of kiosks, the use of mobile, the use of delivery, the use of drive-thru, certainly one of the things is that customers are looking for more of a contactless type of experience. They’re looking for more of a digital type of experience, one that they can navigate on their own.”

With a bit more granular detail as to what took shape at the actual locations, CFO Kevin Ozan said that 70 percent of restaurants in the firm’s international markets saw a significant amount of activity where consumers ordered at the front counter or at kiosks and took food away.

Aggregators, Too

Separately, Yum! Brands reported that its digital sales mix now accounts for 30 percent of sales, a 15-point year-by-year improvement, to $3.5 billion. The number of restaurants offering delivery around the world tallied 34,000, up 13 percent, boosted, as CEO David Gibbs said, by aggregator partnerships.

In this way, as launched for pickup and delivery, same-store sales were up 7 percent year over year. The firm said that since March, as the pandemic took root, Pizza Hut has served close to 20 million contactless orders. All told, management said, with detail on The Habit Burger Grill, digital ordering via mobile and kiosk represented 40 percent of sales during the quarter.

And those aggregators? They’re doing fine, amid the digital shift. For example, delivery aggregator Grubhub said that in its latest quarter, gross food sales of $2.3 billion in the second quarter were up 59 percent from Q2 2019, and the average order size of $39 marked a 20 percent year over year.

The Fab Four

As always, earnings from tech behemoths show just what happens when we’re stuck at home doing things other than eating.

Perhaps not surprisingly, getting content and services (via apps, for example) through remote means and platforms saw a big jump. Amazon’s worldwide streaming video hours more than doubled year over year. Apple said that paid subscriptions grew by more than 35 million sequentially in the quarter, and the firm now has more than 550 million paid subscriptions across the services on its platform, up 130 million from a year ago.

“With this momentum, we remain confident to reach our increased target of 600 million paid subscriptions before the end of calendar 2020,” Luca Maestri, CFO, told analysts.

Facebook reported that its daily active users (DAUs) were up 12 percent year over year to 1.79 billion on average for June, while monthly active users (or MAUs) were also up 12 percent year over year to 2.7 billion as of June 30.

CEO Mark Zuckerberg related on the conference call with analysts that small businesses have been pivoting to the digital-first economy. Before the current crisis, one in three U.S. businesses did not have a website, and now more businesses are realizing they have to be online. The firm’s own research shows that data across more than 50 countries show that at least one-third of SMBs reported earning a minimum of 25 percent of their sales from digital channels in the previous 30 days.

Amazon’s own delivery/same-store pickup activity surged in the quarter. For example, management said that the Whole Foods owner saw grocery pick-up locations more than triple in the quarter, while overall online grocery sales tripled year over year.

As firms go increasingly online, Alphabet’s CEO Sundar Pichai said “the future of business will be more digital. Customers are choosing Google Cloud to either lower their cost by improving operating efficiency or to drive innovation through digital transformation.”

That sentiment also found its way into Amazon’s conference call, where, for example, Amazon Web Services (AWS) is now a $43 billion annualized run rate business, up $10 billion in annualized run rate in the past 12 months, as businesses expand their online offerings.

As earnings season winds on, the second-quarter reports are showing the continued impacts of the coronavirus – and just how deeply entrenched the continued digital shift will become across the globe.


New PYMNTS Study: Subscription Commerce Conversion Index – July 2020 

Staying home 24/7 has consumers turning to subscription services for both entertainment and their day-to-day needs. While that’s a great opportunity for providers, it also presents a challenge — 27.4 million consumers are looking to cancel their subscriptions because of friction and cost concerns. In the latest Subscription Commerce Conversion Index, PYMNTS reveals the five key features that can help companies keep subscribers loyal despite today’s challenging economic times.


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