What McDonald's Management Shuffle Means for Investors

By Markets Fool.com

You've probably heard by now that McDonald's chief executive, Don Thompson, will step down from his post as soon as March 1st this year. Investors rejoiced, sending shares of Mickey D's higher by nearly 5% on the news. With the fast food chain coming off of weak fourth-quarter results and the company's fifth consecutive quarter of U.S. sales declines, a bold move was necessary to reinvigorate investor confidence in the company.

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Cue the management shuffle.

A tumultuous reign
It has been less than three years since Thompson took over for his predecessor, Jim Skinner, as CEO. During that period, McDonald's suffered its biggest same-store sales decline in more than a decade,as well as deteriorating brand value. This poor performance looks even worse against the backdrop of Skinner's reign, during which profits more than doubled, and the company enjoyed eight straight years of same-store sales growth.

It was clearly time for a change. And this week, that change came with the board announcement ofThompson's impending exit. The company has tapped Steve Easterbrook to replace him at the helm. The question now is what this CEO turnover will mean for McDonald's and its shareholders going forward.

Who is this new guy?
While many on Wall Street had hoped for new blood at McDonald's, to bring in a CEO from outside of the company, the new chief in charge is actually a veteran of the golden arches. Easterbrook spent the past 22 years working his way up the ranks at McDonald's, briefly leaving the company in 2011 only to return in 2013 as McDonald's chief brand officer.

For investors, the hope is that fresh leadership at the top will mean a new strategy and a more focused turnaround plan. Yet, so far, the verdict is out on whether Easterbrook can streamline McDonald's menu and business, particularly in the U.S. where its sales are really hurting these days. The good news is that Easterbrook has a track record of turning things around.

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In 2006, for example, he stepped in as CEO of McDonald's U.K. division in hopes of boosting weak sales in the region. By 2008, sales at Mickey D's 1,200 U.K. stores were up around 10% and growing at a steady clip.

Today, he faces the more challenging task of returning the world's largest restaurant chain to its former glory. With McDonald's revenue, net income, and traffic down year-over-year, it is time for new leadership. This doesn't mean investors should expect Thompson's exit to induce immediate changes at the embattled company. However, it is a clear sign that McDonald's board has finally acknowledged that change is needed -- a small victory for shareholders.

The article What McDonald's Management Shuffle Means for Investors originally appeared on Fool.com.

Tamara Rutter has no position in any stocks mentioned, though she's a sucker for McDonald's fries. The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.