What Are the Clowns at McDonald's Doing?

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McDonald’s (NYSE:MCD) share price fell 1.35% today following release of its January earnings report. To say that it was the January lack of earnings that caused the decline may indicate that we are standing too close to the problem to see its full magnitude.

The share price opened on the New York Exchange this morning at $93.34, already down from Friday’s close of $93.99. It fell to a low of $92.45 before closing at $92.72. There is a growing lack of confidence in McDonald’s ability to maintain its global food service dominance as January became the eighth consecutive month of declining year-on-year, same store sales.

Sales in Africa, Asia, Australia and the Middle East were off by 12.6%, dragging overall corporate sales to a 1.8% decline. A little bit of investigation into McDonald’s share price history reveals that it has declined fairly steadily over the last seven months as investor confidence has been eroded by the company’s continuing poor performance. McDonald’s shares last traded over $100.00 on 15 July 2014.

The report said that the company “begins 2015 on a path to regain business momentum” by “accelerat(ing) the pace of change and elevat(ing) the overall McDonald’s experience in the eyes of its customers.” It remains to be seen whether that is a good thing or not. At least some of McDonald’s problems have stemmed from the same strategy in the past several years.

Setting aside the logistics problems of getting French fries to Japan and the cloud that remains hanging over outlets in China like the Beijing smog as a result of supplier corruption, McDonald’s has clearly misunderstood what it should or should not change to increase both customer satisfaction and patronage.

The company that once had a simple, almost understated, vision of what it needed to be for its customers has simply lost its way, bowing to passing food fads and trying to be something for everyone. Speaking personally, I don’t think that McDonald’s recognizes its customers. For that reason, the company has introduced so many changes over the past several years that the customers no longer recognize McDonald’s. While it has introduced a wider variety of menu items (expect that to change), its competitors are beating McDonald’s at its original game: creating value by offering a limited menu of items that have consistent quality.

The problem also extends to the employees. In the early days of McDonald’s extraordinary growth in the U.S., it attracted enthusiastic employees who were proud to work there. Today, working at McDonald’s is considered an alternative to working at Walmart at two of the lowest rungs of any definition of the “career” ladder. These are not the front-line employees that will make the excel. But, you get what you pay for.

McDonald’s is the world’s leading global food-service retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day.  More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business men and women.

If it wants to retain its market position and get back to its glory days, McDonald’s is going to have to rethink who it is and remake itself into something much more distinctive and recognizable. Even the distinct, identifying arches are all but disappearing. The boys in Chicago may want to rethink that. Right now, neither the company nor its share price shows much promise.

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