By Jason Dean, Ilan Brat and Annie Gasparro
McDonald's Corp. said Chief Executive Don Thompson was leaving,
less than three years into his tenure, and promoted a company
veteran to try to revive the fast-food giant from its worst slump
in more than a decade.
Steve Easterbrook, 48 years old, who started with McDonald's in
1993 and is currently chief global brand officer, will succeed Mr.
Thompson on March 1, becoming the company's third CEO in the past
decade.
The company gave no reason for the abrupt retirement of the
51-year-old Mr. Thompson but it comes after two years of worsening
sales declines in its core U.S. market that have so far defied
management's remedies.
Net income last year fell nearly 15%, to $4.76 billion, and the
company's stock has been basically flat since Mr. Thompson took
over in July 2012--a period when the Dow Jones Industrial Average
rose 36%.
McDonald's shares rose more than 3% in after-hours trading on
Wednesday following the news, to $91.60.
A spokeswoman said the retirement, announced after a regularly
scheduled board meeting on Wednesday, was Mr. Thompson's
choice.
In a statement, Mr. Thompson said Wednesday, "It's tough to say
goodbye to the McFamily, but there is a time and season for
everything."
"Steve is a strong and experienced executive who successfully
led our U.K. and European business units and the board is confident
that he can effectively lead the company to improved financial and
operational performance," said Andrew McKenna, McDonald's
nonexecutive chairman, said in announcing the change.
Left unclear for now is how Mr. Easterbrook will address the
broad range of challenges McDonald's faces. Its business is under
attack from a host of smaller, more focused "fast casual"
restaurants that are winning younger consumers with fresher and
more customized offerings. These range from burrito chain Chipotle
Mexican Grill Inc. to upstarts like Shake Shack Inc., a boutique
burger joint with 63 locations that is expected to raise up to $109
million in an initial public offering scheduled to price on
Thursday.
The Golden Arches also is wrestling with the effects of its own
expansion over the years, with more than 14,350 locations in the
U.S.--4.6 for every county in the country--and a menu that
executives acknowledge has become so bloated with items that it has
slowed service.
Mr. Thompson's team, including Mr. Easterbrook, has unveiled a
litany of proposed solutions in recent months. It announced last
month plans to eliminate low-selling items from its menu, and to
expand experiments with more customized offerings.
That followed a restructuring of its U.S. operations designed to
give regions more autonomy to offer locally tailored products.
This month, McDonald's launched a new marketing campaign in the
U.S. with commercials and food packaging designed to refresh its
longtime "I'm lovin' it" slogan, under Chief Marketing Officer
Deborah Wahl, who joined in March, and McDonald's USA President
Mike Andres, who took over in October.
Still, McDonald's said it expects January same-store sales to
decline, after a 3.6% decline in global customer traffic last year,
including a 4.1% drop in the U.S.
"Don got fatally behind the last couple of years," said John
Gordon, restaurant consultant at Pacific Management Consulting
Group. "And he hasn't presented to the investment community that
he's moving quickly to solve these problems."
McDonald's has a history of promoting within its ranks rather
than recruiting outsiders, which comes with the risk that the
changes won't be substantial. But some investors and analysts think
the potential to shake-up the business is still there with Mr.
Easterbrook.
"While Easterbrook is an insider, I think his expertise and
focus on branding, media, and menu should give him credibility in
the areas that McDonald's is most needing change and improvement,"
said Will Slabaugh, restaurant analyst at Stephens investment
bank.
Investor Bill Smead, CEO of Smead Capital Management, said that
even though Mr. Easterbrook and Mr. Thompson have long been on the
same management team, that doesn't mean they have the same
management style.
"I think Don [Thompson] just wasn't inspiring the franchisees or
people around him in the way that they needed to be," said Mr.
Smead, whose firm owns about 1.6% of McDonald's shares.
Mr. Easterbrook has cut a ragged path through McDonald's
corporate leadership roles, starting in London as a financial
reporting manager in 1993.
He climbed the ranks of its U.K. operations and in September
2010 was named the top brand officer. After just two months, he
took over as the president of the company's European
operations--then left McDonald's less than a year after that.
He then served stints as CEO of two British restaurant chains,
PizzaExpress Ltd. and Wagamama Ltd., before returning to McDonald's
in June 2013 to head up global brand operations once again.
Last March, McDonald's broadened Mr. Easterbrook's
responsibilities to include oversight for corporate strategy and
the restaurant solutions group as well as sustainability and
philanthropy.
Mr. Easterbrook has been vocal about McDonald's need to make
itself attractive again to so-called millennials, consumers in
their mid-teens to mid-thirties--once a core demographic for the
chain.
Millennials "want to buy into a brand not just from it," he said
in an interview with The Wall Street Journal last summer. "What
we've got to do is find interesting and engaging ways to share that
information with millennials, not old-fashioned corporate
lecturing.
Also on Wednesday, McDonald's appointed Google executive Margo
Georgiadis to its board, representing a push to improve digital
capabilities and connect with younger consumers.
Write to Jason Dean at jason.dean@wsj.com, Ilan Brat at
ilan.brat@wsj.com and Annie Gasparro at annie.gasparro@wsj.com
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