By Annie Gasparro
After a string of attention-getting announcements in the past
two months, McDonald's Corp. Chief Executive Steve Easterbrook is
expected on Monday to give the first thorough look at his strategy
to revive the fast-food giant.
Analysts agree the meeting will be a must-watch for those
interested in the Golden Arches' future--though they have little
idea what the new CEO is likely to say, and how far it will go
beyond the moves he has announced already on issues from raising
wages to trimming menu items.
"Investors will be laser-focused on this potential catalyst
event," Oppenheimer & Co. analyst Brian Bittner said.
McDonald's publicly has said only that Mr. Easterbrook will
"share initial steps of our turnaround plan," with an early-morning
announcement followed by conference calls with analysts and the
media.
Mr. Easterbrook, who took the helm on March 1, has set
expectations high for his turnaround efforts. He repeatedly
describes himself as a change agent dedicated to turning McDonald's
into a "modern, progressive burger company," and says he and his
team "are challenging some of the conventional thinking on multiple
fronts."
Some analysts expect Mr. Easterbrook to offer a comprehensive
plan that mirrors the "Plan To Win" strategy McDonald's unveiled in
2003 that ushered in one of the most successful streaks in the
company's 60-plus-year history. They refer to Mr. Easterbrook's
yet-to-be named blueprint as "Plan To Win 2.0."
Some of the contours are clear. The turnaround plan likely will
address how McDonald's can improve efficiency at its restaurants to
shorten wait times and increase profits, efforts to improve food
quality and brand image, and financial strategies to create
shareholder value, analysts said.
Several analysts said they expect him to focus on improving
restaurant operations rather than corporate structure in the
meeting. They want to see everything from better technology in
restaurants to a wider rollout of a buttermilk chicken sandwich
that can compete against offerings from Chick-fil-A Inc.
"Part of the question is 'What does he say?' and part of it is
'What does he say to what extent?' " said Janney Capital Markets
analyst Mark Kalinowski.
Monday's presentation faces a hurdle of Mr. Easterbrook's own
making: He already has reeled off so many plans--many of which will
take a while to yield results--that it will be tough to make a new
splash. Here are some of the main announcements McDonald's has made
in just the nine weeks since Mr. Easterbrook became CEO:
-A plan to curb antibiotic use in its chicken in the U.S. over
the next two years
-Plans for wage increases at U.S. corporate-run restaurants
-Testing of all-day breakfast at some U.S. restaurants
-New premium chicken sandwiches and sirloin burgers in the
U.S.
-The removal of several low-selling burgers, sandwiches and
wraps from its U.S. menu
-Plans to close 700 restaurants globally this year, twice as
many as initially planned
Still, investors seem encouraged by Mr. Easterbrook's sense of
urgency. "Sometimes new CEOs are catalysts for meaningful positive
change, and we have certainly seen an attitude from Easterbrook
that matches that," Mr. Kalinowski said.
The original Plan To Win was implemented by three CEOS in 2003
and 2004. It followed a downward slide in which McDonald's had
posted its first quarterly loss in history. The chain had focused
too much on adding more restaurants, rather than keeping existing
ones ahead of the competition, so it improved the service, food,
ambience, value-perception and marketing.
By 2005, McDonald's had re-emerged with steady sales and profit
growth. From 2004 through 2011--including the global economic
slump--its stock price quadrupled.
"McDonald's has been through this before," said Miller Tabak
analyst Stephen Anderson. "Plan To Win 2.0 won't be as pretty as
the original one...so far the strategy seems all over the place,"
but it could still do the trick, he said.
McDonald's recently said its first-quarter profit fell a
steeper-than-expected 32%, as sales at U.S. restaurants open at
least 13 months fell 2.6%, adding to more than two years of
lackluster earnings. Since the end of 2011, its shares are down
more than 2%.
Still, that is an improvement from where they were before Mr.
Easterbrook's appointment was announced in January. Shareholders
have praised his confidence.
Investors aren't the only ones who will be looking for more
guidance from Mr. Easterbrook on Monday. So, too, will members of
another important stakeholder group that's been less impressed with
some of his changes: franchisees. Some of them have raised concerns
about the cost of changes and are upset with the decisions
McDonald's made without their knowledge.
Mr. Easterbrook said on McDonald's April earnings call that
turnaround phases are "a little bumpy by nature," but that bold
decision-making is needed.
The Week Ahead looks at coming corporate events.
Write to Annie Gasparro at annie.gasparro@wsj.com
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