Shares of McDonald’s surged today after investors and analysts cheered a board-engineered management shakeup in which Don Thompson will be replaced as CEO by Global Chief Brand Officer Steve Easterbrook.
The move, announced after the market closed yesterday, is effective March 1.
McDonald’s stock, which has been essentially flat since Thompson took over in July 2012—a time when the broader market rose more than 35 percent—rallied 5.1 percent, the most since 2008, to close at $93.27.
The appointment of Easterbrook came as little surprise to those inside and outside the company, who view him as a change agent who brought a sense of urgency to McDonald’s when he returned to the company a year and a half ago after spending two years heading a pair of U.K.-based restaurant chains.
Easterbrook, a Briton who has spent the better part of two decades with the Oak Brook-based burger giant, left the company in 2011 shortly after he became president of McDonald’s Europe, where he was responsible for 7,000 restaurants spread across 39 countries. McDonald’s brought him back in June 2013 as global chief brand officer.
In an October interview with Fortune Magazine, Thompson said of the decision to lure Easterbrook back: “I love the fact that he had experience sitting in a CEO chair. It broadened his purview of business in general.”
As chief brand officer, Easterbrook’s responsibilities included leading McDonald’s global marketing efforts, advancing its menu and building its newly formed digital team and strategy.
Investors are looking for him to make aggressive and transformational changes at McDonald’s, which has been locked in financial decline for more than a year. The company last week reported a 21 percent decrease in profit for its most-recent quarter, along with a nearly 2 percent drop in same-store sales in the U.S., its most important market.
In a note to clients, Mark Kalinowski, an analyst at Janney Capital Markets, said he hopes Easterbrook will be given leeway by the company’s board to “act as the change agent we would argue McDonald’s sorely needs.” He hopes to see Easterbrook take steps to further simplify the burger giant’s bloated menu and repair its flagging reputation on the quality of its food.
Dean DeBiase, chairman of Chicago-based companies AKTA and Reboot Partners who is familiar with Easterbrook’s work, called him “the right person at the right time for the next generation of McDonald’s growth and transformation.” He said Easterbrook is a “proven turnaround CEO who knows how to drive cultural change at scale, both in the company and the competitive marketplace.”
While Easterbrook was widely viewed in Oak Brook and Wall Street as Thompson’s successor, the timing of the latter’s retirement announcement caught some off-guard. Richard Adams, a former McDonald’s franchisee who runs San Diego-based Franchise Equity Group, a consulting firm that focuses on McDonald’s, said of the dozen or so franchisees with whom he’s spoken since the announcement: “Nobody saw this happening this fast, including me.”
Easterbrook, he said, is largely unknown among U.S. franchisees because most of his career has been spent in the U.K. They hope he’ll move with urgency to spur a turnaround, something Adams said Thompson was perceived as lacking.
“What’s gone on for the last year is best described as good old-fashioned foot-dragging,” Adams said. Thompson “just seemed to have wasted the last year without accomplishing much.”
Source: Crain’s Chicago Business