Shaking it up
McDonald’s has finally given its investors some goodies to savor. The Big Mac purveyor reversed a stubborn sales slump in the third quarter. It’s too soon to declare Chief Executive Steve Easterbrook’s turnaround a success, but the business is stabilizing as the fast food giant grapples with changing consumer tastes. Shareholders are getting their happiest meal in ages.
The burger chain’s stock price jumped 8 percent on Thursday, hitting a new record after the company beat Wall Street earnings estimates and revealed a 4 percent increase in sales at restaurants open for more than 12 months. Investors were expecting improvement over last year, when a food safety scandal in China thwacked sales there. But the real red meat for investors was the recovery in McDonald’s core U.S. market, which registered a 0.9 percent rise in so-called same-store sales, reversing two years of declines.
The rebound suggests McDonald’s is succeeding with changes Easterbrook has made since taking over in March from Donald Thompson as CEO. The new boss has shaken up the menu, raised wages and announced plans to cut $300 million of other costs to counter competition from the likes of Chipotle Mexican Grill, Shake Shack and a reinvigorated Burger King. McDonald’s said it expected comparable store sales to continue rising in all of its major geographical business segments in the current quarter. That should reassure investors that the latest results weren’t a fluke.
It will take McDonald’s several more quarters of strong performance to make up all the ground it lost during its prolonged sales slump. Easterbrook also has his work cut out for him trying to persuade shareholders that the company has developed a recipe for long-term success. Consumers are more health conscious than ever and less loyal to established brands like McDonald’s.
The next glimpse into Easterbrook’s plan to transform the chain into a “modern, progressive burger company” will come in November at its investor day. For now, though, shareholders can sit back and enjoy some mighty tasty financial results.