The McDonald’s Corporation (MCD, Financial), headquartered in the United States, is the world's largest chain of hamburger fast food restaurants. The company started in 1940, as a barbecue restaurant operated by Richard and Maurice McDonald, which was purchased by businessman Ray Kroc in 1955. He founded the McDonald’s Corporation, and 5 years later acquired the exclusive rights to the McDonald’s name.
McDonald's Corporation went public in 1965. Common shares were initially offered at $22.50 per share, but the price rose to $30 by the end of the first day's trading. In 1980, McDonald's Corporation was one of the 30 companies that constituted the Dow Jones Industrial Average.
Sales Slump
The McDonald's Corporation reported its sharpest monthly decline in U.S. same-store sales in more than 14 years in November 2014, with more-than-expected sales decline in all its divisions. The U.S. fall was the largest, with sales dropping to 4.6% from the same month in 2013, and much more than September 2014’s 4.1% sales fall, which was then the company’s largest monthly drop since early 2003.
The company has seen a rapid decline in sales due to a number of factors. In an attempt to appeal to a broader spectrum of customers, McDonald had added a range of items to its menu which resulted in slower service. The rising prices of different parts of the menu have also managed to thwart off customers. The health conscious section of public is also fast gravitating toward food, which they find more wholesome and nutritious.
Along with stiff competition from long-standing rivals like Burger King Worldwide (BKW, Financial), a range of smaller restaurants that are luring younger consumers with fresher and varied customized offerings, are only adding to McDonald’s woes.
The net income fell nearly 15% in 2014, to $4.76 billion, and McDonald’s stock has been essentially low since July 2012—a time when the Dow Jones Industrial Average increased 36%.
Resignation of CEO, rise in sales
McDonald's CEO, Don Thompson, has declared his resignation, after serving for almost 25 years at the fast-food chain, effective 1st March 2015, and will be replaced by its chief brand officer, Steve Easterbrook. After declining sales took a toll on the brand image of McDonald’s, Don Thompson was under immense pressure to restructure and rejuvenate the business. The ouster arrives after months of denials, disapprovals and alterations at the world's leading fast-food chain.
The company reported its initial decline in worldwide same-store sales in 2014 since 2002, with shares dropping 10% over the past three years. But right after the announcement of Don Thompson’s resignation news, McDonald's stock jumped 3.4% in after-hours trading.
Tryst to Regain Lost Shine
McDonald’s is trying hard to regain its former glory and has gone about it with a vengeance. It started a new ad campaign that depicts the chain as being genuinely concerned about consumers’ perception about the quality of its food. After years of expanding its menu, it has started eliminating menu items in order to focus on exclusivity. McDonald’s has recently started an experimentation in some Southern California outlets, which allows customers to walk up to kiosk tablet and customize their burgers and sandwiches with many options to choose from.
With the full-fledged attempt by McDonald’s to reinvent its image and the sudden increase in McDonald’s stock, one can only wait and watch how the biggest fast-food chain recuperates from its damages and reinstates its image in the fast-changing and competitive restaurant market.
