The revival McDonald’s Corporation (NYSE:MCD) and McDonald’s stock have enjoyed since initiating All-Day Breakfast has waned. With second-quarter same-store sales growing at less than 2%, combined with an almost 4% decline in revenue, MCD has decided to shake things up and has announced the departures of several top executives.
But how much will this help McDonald’s stock?
According to a Monday Wall Street Journal report, Karen King, McDonald’s chief field officer, will retire at the end of the year. King was in charge of more than 14,000 McDonald’s U.S. locations. Erik Hess, who serves as McDonald’s senior vice president of customer experience, will also leave the company. Hess was in charge of McDonald’s menu strategy and insights.
These departures come on the heels of McDonald’s having already announced the retirement of Mike Andres, president of U.S. operations, and Pete Bensen, chief administrative officer, the Journal noted. David Hoffmann, who was in charge of McDonald’s high-growth markets division, recently left the company to become president of Dunkin Brands Group Inc’s (NASDAQ:DNKN) Dunkin’ Donuts in the United States and Canada.
This recent development sent MCD stock down more than 1% on Monday.
What the Future Holds for McDonald’s Stock
McDonald’s shares have struggled since McDonald’s second-quarter earnings results in July revealed that the novelty of All-Day Breakfast was gone. Beyond ADB, CEO Steve Easterbrook has sought to change how McDonald’s is perceived by customers. In an effort to win over millennials, who have moved towards competitors such as Chipotle Mexican Grill, Inc.(NYSE:CMG) and Panera Bread Co (NASDAQ:PNRA), he’s also focused on using fresh and healthier ingredients, while improving order accuracy.
While Easterbrook has done a solid job transforming McDonald’s, despite a challenging environment in several key markets, MCD stock has fallen 2% this year and while climbing just 1.8% in the past 12 months, trailing the S&P 500 during both spans.
Nonetheless, it’s encouraging for MCD stock that McDonald’s has posted four straight quarters of positive same-store sales growth.
The company is set to report third quarter earnings this Friday before the opening bell. For the quarter that ended September, Wall Street expects McDonald’s to deliver $1.49 per share on revenue of $6.28 billion, according to Thomson Reuters. This compares to the year-ago quarter when the company earned $1.54 per share on $6.62 billion in revenue.
Despite executive departures, McDonald’s is in solid hands with Easterbrook, who said last year that McDonald’s will cut $500 million in annual costs by 2018 and sell 4,000 restaurants to franchisees. On Friday, analysts will press for an update on the company’s cost-cutting goals, along with its outlook for the rest of the year and beyond.
For now, with MCD priced at just 18 times fiscal 2017 estimates of $6.14 per share, implying 10% growth, McDonald’s stock is on the value menu.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
