Sunday 26 February 2017

McDonald's to develop new turnaround plan as sales fall again

McDonald's has announced a pay rise for workers at its company-owned stores
McDonald's has announced a pay rise for workers at its company-owned stores

McDonald's Corp's new chief executive officer, who is charged with reinvigorating world's biggest restaurant chain, on Wednesday said he would deliver his turnaround plan next month.

In his first quarterly conference call with investors and analysts, CEO Steve Easterbrook described himself as a "champion of simplicity" who values personal accountability and "progress over perfection." He took the helm on March 1 following one of McDonald's most dismal years on record.

Shares of the fast-food company were up almost 5 percent in early trading. At midday, they remained 3 percent higher at $97.70 as investors shrugged off declines in quarterly earnings and sales.

McDonald's global sales at restaurants open at least 13 months fell a worse-than-expected 2.3 percent in the first quarter, and the company warned of another drop in April.

Net income tumbled 32.6 percent to $811.5 million, and revenue was down 11 percent at $5.96 billion.

Easterbrook plans to unveil his plan for turning McDonald's into a "modern, progressive burger company" on May 4.

"Folks hoping for a near-term rise in the stock may be hanging their hat on hopes that McDonald's can spark some pizzazz in investors that day," Janney Montgomery Scott analyst Mark Kalinowski wrote in a note.

Easterbrook said he planned to change the way consumers think about McDonald's and the quality of its food.

He has already has said McDonald's USA would switch to chicken raised with fewer antibiotics, putting it more in step with rivals. Other plans include the debut of a new "premium" sirloin burger as well as tests of custom sandwich toppings, all-day-breakfast and salad bars.

McDonald's is battling on myriad fronts.

Consumers around the globe are increasingly rejecting processed fast-food in favor of healthier fare made from fresh, simple ingredients.

Smaller, nimbler U.S. competitors such as Wendy's Co (WEN.O), Chipotle Mexican Grill Inc (CMG.N) and Chick-fil-A have been more responsive to those changing tastes at a time when McDonald's relations with U.S. franchisees are strained.

Results from McDonald's U.S. business, which has suffered a string of monthly same-restaurant sales declines, disappointed again in the first quarter after products such as premium chicken tenders failed to meet targets.

Those sales also fell in Asia, which is viewed as a long-term growth market, as China and Japan continue to grapple with the aftermath of food safety and quality problems.

Reuters

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