McDonald’s Turnaround Plan

McDonald’s Corp.’s turnaround plan presented Monday offered many of the corporate fix-up standards: a leadership reorganization, cost cuts and plans to return cash to shareholders. Yet investors were hoping for more. While analysts said the moves Chief Executive Officer Steve Easterbrook announced were steps in the right direction, his presentation lacked more radical changes like splitting off McDonald’s land holdings. Others found the plan lacking specific solutions to the chain’s most pressing problems, such as its bloated menu, slow service and the perception that its food is low quality.

The shares fell as much as 1.4 percent, and the company’s debt rating was cut by Standard & Poor’s. “The market expected more,” said Asit Sharma, an analyst at the Motley Fool. “Easterbrook set the expectation that he would present a novel solution to McDonald’s woes” and instead delivered changes that “could have been announced on a quarterly earnings call.” To snap the sales malaise that got his predecessor ousted after less than three years as CEO, Easterbrook is revamping the company’s leadership into four segments of similar markets. One will focus on the U.S., another will oversee countries like Canada and France, where McDonald’s is well-established. Yet another will manage markets such as China and Poland, where the chain is growing more quickly. The final unit will oversee the other 100 countries where McDonald’s operates, a segment Easterbrook is calling Foundational Markets. While the new structure is mostly targeted at improving performance, Easterbrook also says it will help cut $300 million in general and administrative costs by the end of 2017.
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