McDonald's released its first-quarter earnings report on April 22. Sales were down 2.3% across combined geographic segments, owing to decreasing customer traffic. However, thecompany'sstock price has changed little following the quarterly report and conference call.
Here are five key takeaways from the call, in whichCEO Steve Easterbrook, CFO Kevin Ozan, Chief Administrative Officer Pete Bensen, and Vice President for Investor Relations Chris Stent discussed the latest results and the future of the business.
Easterbrook's business philosophy and vision for McDonald'sJust monthsinto Easterbrook's tenure as head of McDonald's, there are still many questions about his management style and vision for the company. This was Easterbrook's first conference call as CEO, and he spoke early on about his goals and operating principles for the company:
Easterbrook alsoindicated he would seeksimplicity,a more efficient use of the company's scale advantage, and better responses to market conditions, then asserted the company's direction would not be confined by "legacy attitudes and legacy thinking." The CEO gave a bit more insight intohis "modern, progressive burger company" philosophy, stating that it entails modernizing the brand and adapting to servethe customer base of the future.
McDonald's plans to make changes quicklyIn response to turbulent storeperformance over the last year, McDonald's is emphasizing its willingness to move in new directions at a brisk pace. The company posted same-store sales declines across all of its major geographicsegments in its first quarter, with sales falling 2.3% globally and 2.6% in the U.S.Declining customer traffic,failed promotions, and high renovationcosts have alsocreated a tense dynamic with franchisees. Easterbrookaddressed thenecessity of experimentation and quick action:
Easterbrook said the company is targeting a growth-led turnaround, rather than one achieved primarily through improving operational efficiencies.
Global performance was disappointing, but with some bright spotsWhile declining U.S. same-store sales remain an issue for McDonald's, performance in other territories has been responsible for a greater shareof the company's recent turbulence. Ozanbroke down the global sales picture and gave some color on the company's Asia-Pacific Middle East Africa segment:
The company last quarter closed 350 underperforming stores, located mostlyinChina, Japan, and the U.S., but also noted that China saw sequential quarterly sales improvement. Sales rose in the U.K. for the 36th consecutivequarter and were up in Australia for the third consecutive quarter.
McDonald's is working on a mobile app and new marketing strategiesDuring the call, Easterbrook spoke frequently about better understanding and servingthe modernconsumer. The CEO stressed better utilization of data and analytics, as well as increased efforts to personalize advertising strategies, as ways that McDonald's can better understandandadapt to theneeds of its market. Here's Easterbrook on the shift in marketing strategy and what it means for McDonald's:
Easterbrook confirmed that the company's mobile app would launch in the U.S. in the second half of the year, and said the app is intended to improve the customer experience and broader engagement with the McDonald's brand.
May 4 brought more detailWhile the executives had plenty to say during the roughly one-hour conference call, Easterbrook continually pointed to May 4 as the date when the company would provide more specific details about its turnaround strategy. The company's press release from May 4 says the company is reorganizing and streamlining its system. In terms of specifics, the company says it aims to step up its refranchising plans and refranchise 3,500 restaurants by the end of 2018, increasing the global franchised percentage from 81% now to about 90%. It is looking to eventually deliver $300 million in net annual general and administrative savings and to return $8 billion to $9 billion to shareholders in 2015.
The article 4 Things McDonald's Corp. Management Wants You to Know originally appeared on Fool.com.
Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Apple and McDonald's. The Motley Fool owns shares of Apple. 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.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.