McDonalds Leaving a Bad Taste

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Perhaps it would be in McDonalds’ (NYSE:MCD) best interest to stop publishing their monthly results until their operational results turn around. February 2015 results just extended the continuum of disappointment for another 30 days (I know. February has only 28 days, but that’s not the point.)

© Image copyright smemon

McDonalds’ share price is currently at 97.94, up only slightly over yesterday’s close at 97.81. Although its activity in the market is somewhat subdued compared to its continuing sales decline, that may simply be a sign that investors are willing to give new CEO Steve Easterbrook at least half-a-chance to get the company back on the rails again.

Global like-for-like sales in locations that have been open for more than 13 months were down 1.7% against an anticipated decline of 0.3%. Asia, Africa and Middle East sales were down 4.4%, while U.S. sales suffered an unexpected and disappointing 4.0% decline.

The February report cited “ongoing aggressive competitive activity” as the major reason for the decline in U.S. sales. Pardon me for a rare bit of sarcasm, but has something changed since my days of business management? I thought that all competitive activity was ongoing and aggressive. I don’t ever recall any of my competitors deciding to ease up and be less aggressive. On top of that, I don’t understand blaming the competition’s success for my own failures. Rather, I believe that companies generally succeed (or fail) primarily on their own merits or mistakes.

New CEO or not, McDonalds’ inability to recognize and correct its own shortcomings between its menu offerings and what consumers want is yet another symptom of their overall problem. Although MCD is the indisputable leader in fast food, it is stumbling like a punch-drunk boxer. Imagine that boxer, sucking for air in his corner, telling his handlers that his opponent won’t stop being aggressive! He has clearly lost his senses.

Strategies about being “more relevant” seem to be wildly broad-based – not the kind of kick-start, kick-butt, catalytic transformation that McDonalds really needs. Which prompts me to wonder where that pipe-dreamer who came up with the “loving it” campaign is hiding. Somebody in the organization has got to wake up and realize that when people have become sick and tired of the same old taste and the same poor level of service (I don’t care what their surveys say. Have you actually been to a McDonald’s in the last five years?), they don’t care about getting a free sandwich in return for a random act of kindness. The people in the marketing department aren’t even in the game.

Personally, I do not see how McDonalds is every going to fully recover. For the time being, McDonalds is too large and to ubiquitous to just fold up and go away, but I believe that we are seeing the beginning of a long, slow descent from its position of dominance. About the best that Easterbrook will be able to do is slow the decline and stabilize the company at some point where it establishes a new approach and identity. Whatever change he introduces, however, to be effective, is going to have to be radical, because this is ridiculous.

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