MCD Gets Digital — But Can It Save McDonalds Stock?

by Alyssa Oursler | October 4, 2013 11:40 am

McDonalds (MCD[1]) announced yesterday that Atif Rafiq will be the company’s new chief digital officer — a new position that also sums up a new strategy for a struggling MCD.

With McDonald’s stock lagging rivals so far this year, MCD is looking to spark interest and growth yet again. To that end, MCD has introduced not just a pile of new offerings, but also lots of modern features like mobile payments, a new electronic loyalty program and more.

New MCD hire Rafiq, who has managed teams at online giants Amazon (AMZN[2]) and Yahoo (YHOO[3]), will be in charge of implementing and improving the company’s global “comprehensive digital strategy” — which in turn will hopefully jump-start McDonalds stock.

MCD Stock Still Stuck in the Mud

McDonalds stock is still recovering from a dismal 2012 that saw the first decline in global sales for MCD in nine years, on top of a slight decline in margins. The result: MCD net income fell year-over-year for the first time since 2007, and while McDonalds stock fell by double digits.

So far this year, things have been better at MCD — but that’s not saying much. McDonalds grew earnings per share in each of the first two quarters of the year, but by less than analysts were expecting. The result: McDonalds stock has lagged the market year-to-date and still hasn’t recovered to the triple-digit price tag it sported at the start of 2012.

The question for MCD stock investors, of course, is whether these new initiatives will be enough — or if it’s too late for the golden arches to regain their shine.

The McDonalds stock turnaround seems promising, though, considering MCD posted a killer 2011 thanks to atmosphere improvements and new offerings — the same things it’s focusing on now. Halfway through that strong year for MCD stock, then-CEO Jim Skinner said:

“The modernization of our restaurants, coupled with menu innovation and enhanced accessibility of our brand continues to deliver the unique McDonald’s experience that is resonating with our customers around the world.”

It has taken some time for new CEO Donald Thompson to start making similar moves, but continued innovation has definitely been on the menu in recent months. In fact, the move to offer side salads at no extra charge in value meals is by far the most promising update — and one that will have long lifespan.

With that in mind, the digital push for MCD is just the latest way the fast-food giant is modernizing its restaurants. If it is pulled off properly — which seems likely given Rafiq’s experience — and if past is precedent, the digital push could pay off big-time for McDonalds stock.

As of this writing, Alyssa Oursler was long MCD.

Source URL: https://investorplace.com/2013/10/mcd-mcdonalds-stock-digital/

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