McDonald's admits: We stink right now
McDonald’s (MCD) latest sales figures continue a pattern of bad news. Sales at stores in the U.S. open at least a year falling 4% in February…with overall global sales dropping 1.7%. It was the ninth-consecutive month of declines for the Golden Arches.
But that’s not the big headline from this report. Instead, it’s McDonald’s comments that the fast-food giant has NOT reacted to shifting consumer trends…and it needs to do something about that. The company noting:
…consumer needs and preferences have changed, and McDonald's current performance reflects the urgent need to evolve with today's consumers, reset strategic priorities and restore business momentum. The goal going forward is to be a true destination of choice around the world and reassert McDonald's as a modern, progressive burger company.
Not the kind of statement we’ve come to expect from corporate America. But Yahoo Finance Senior Columnist Michael Santoli says there’s a reason why the company is being so candid.
“It’s surprising if there weren’t a new CEO in there,” he notes. “And I think the new CEO (Stephen Easterbrook) is using every inch of the slack investors are going to give a new CEO to come in a basically state the obvious, because the market has been saying this about McDonald’s for a long time.”
Yahoo Finance’s Aaron Task agrees.
“You get a new CEO, they always get the opportunity to come in and say we’re going to change everything up,” he points out. “Typically you get a quarter or two where shareholders give them that opportunity.”
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Santoli likes the way Easterbrook is trying to take advantage of this honeymoon period.
“He’s being masterful about it. He’s kind of saying 'we really actually need to shake this company up, we can’t go on with business as usual, we’re not going to pretend everything is OK.'”
But Task feels Easterbrook still has a tough job ahead.
“Right now, there’s a lot of shareholder pressure on McDonald’s and Easterbrook,” he adds. “He’s under a very intense microscope because it’s not just a quarter or two here for McDonald’s, it’s been a couple of years where they have lagged behind the competition.”
Santoli doesn’t believe Easterbrook will be making major changes in the way McDonald’s operates in order to right the ship.
“I don’t think we’re going to see too much on the financial front,” he argues. “A lot of people want to see them realize value from the real estate. I don’t think that’s going to be a priority.”
Instead, Santoli thinks Easterbrook will stick to his roots-- selling food.
“He’s kind of a branding guy,” he notes. “So menu stuff. I think one of the things he did in the U.K. was put less salt on the fries. All these general gestures that say, 'hey, we hear you that you don’t want the same old food.'”
Easterbrook has said he wants to be an internal activist at McDonald’s. Santoli feels by “calling it like he sees it,” Easterbrook will have some breathing room to change things around.
“For a while, I think he’s going to rely on that-- be a truth-teller-- and say 'look, we’re going to prioritize the right things and hopefully the business is going to follow along.'”
However, Task believes that won’t buy him too much time.
“I don’t think it will be long before the external activists put pressure on this internal activist to get that stock price moving,” he says.
