I remember being a young boy in Burbank and eating my first McDonald’s (NYSE:MCD) hamburger. My boy-scout troop received coupons for hundreds of free hamburgers and we rejoiced in getting to try this new fast-food phenomenon. Little did we know that one day, the nation and the world would be covered in Golden Arches. The stock went public on January 2, 1970 at a split-adjusted price of $0.23 per share. Today it is trading at more than $92.
The company is a totally different animal today. McDonald’s Corp. is now a $90 billion company that operates 35,429 restaurants around the world. And in this more complicated environment of Portobello mushrooms, chipotle mayo, and onion strings, it is struggling to stay current. Just last week, the company ousted its CEO, Don Thompson who was at the helm over the last three years.
Thompson’s ouster is not really a surprise. Recent results for the company have been quite dismal, with its fourth quarter comps declining 0.9%. Its last quarter’s earnings were down a whopping 21%. And the company’s global results, which had been a key growth driver, look just as weak plagued by food safety scandals in various regions.
So will a newly announced CEO Steve Easterbrook be able to turn things around at the struggling company?
McDonald’s, once an innovator in the industry, it now associated with mediocre products, poor in quality and unhealthy to consume. It has failed to adapt to the changing tastes of consumers who prefer healthier options with fresh ingredients like Chipotle Mexican Grill (NYSE:CMG). Ironically, McDonald’s used to own Chipotle and spun it off in 2006.
Here’s what the new CEO needs to know!
- Customers want fresh, good-tasting food, not dry, tasteless burgers that sit in a drawer
- Customers would rather have fewer menu options of better quality
- Cleanliness and quality ingredients matter – pink slime, fabricated chicken, and 14-ingredient French fries are just gross
- Franchise owners are not happy – they want a more streamlined menu of top-selling items that are easy to make.
Easterbrook, who held the post of sr. executive VP and chief brand officer and was the president of McDonald’s Europe, has an impressive past track record. He turned around the brand in the UK by putting focus back on its burgers and improving customer perceptions about the company.
In order to increase sales and drive traffic back into the stores, McDonald’s needs to totally transform its image in the mind of consumers.
McDonald’s mediocre products have translated into awful performance for shareholders. In an up stock market last year, the stock traded flat to down. And the stock has underperformed over the last 3 and 5 year periods.
Data from Best Stocks Now app
This is not the first time the company has needed to reinvent itself. Back in 2003, the stock traded as low as $12 per share and was in a similar situation. Then along came a turnaround expert by the name of Jim Skinner who added premium burgers and more breakfast items to the menu. The stock rebounded to over $100 per share by 2011.
But McDonald’s new CEO definitely has his work cut out for him. Maybe they should figure out what recent IPO Shake Shack (NYSE:SHAK) is doing. Now that looks like a good burger!
Contrast that with McDonald’s offering – it looks stale and cold! Which burger would you rather eat?
It is no wonder that McDonald’s stock is ranked #1481 out of the 3900 stocks in the Best Stocks Now universe. Its stock grade is B- and it rates a weak HOLD. McDonald’s stock is definitely NOT an example of a Best Stock Now. Good luck Mr. Easterbrook.