McDying

[3step]

McDonald's has supersized problems - Apr. 22, 2015

Everything has its date. And McDonald’s too. After scandals about the quality of products, spreading environmentalist points of view on the food industry the world reputation of MCD suffered a lot. In the first quarter of 2015 the profits tumbled, 350 restaurants were closed. Chairman Andrew McKenna said the new McDonald’s CEO Steve Easterbrook "can effectively lead the company to improved financial and operational performance".

 

[LowDown]

McDonald's has supersized problems - Apr. 22, 2015

Everything has its date. And McDonald’s too. After scandals about the quality of products, spreading environmentalist points of view on the food industry the world reputation of MCD suffered a lot. In the first quarter of 2015 the profits tumbled, 350 restaurants were closed. Chairman Andrew McKenna said the new McDonald’s CEO Steve Easterbrook "can effectively lead the company to improved financial and operational performance".

McDonalds is getting a lot of competition from burger chains that sell burgers that are bigger and fatter than anything McDonald's sells. McDonald's looks like a health food store next to them. Outfits like Red Robin, Five Guys, and In and Out don't sell a burger that's as small as a Big Mac. People are flocking to those places. The foodie nut jobs who criticize McDonalds all the time never ate there in the first place. The idea that their point of view has anything to do with McDonalds sales is silly.

 

[OrphanSlug]

McDonald's has supersized problems - Apr. 22, 2015

Everything has its date. And McDonald’s too. After scandals about the quality of products, spreading environmentalist points of view on the food industry the world reputation of MCD suffered a lot. In the first quarter of 2015 the profits tumbled, 350 restaurants were closed. Chairman Andrew McKenna said the new McDonald’s CEO Steve Easterbrook "can effectively lead the company to improved financial and operational performance".

As usual, there is more to the story...

Yes, there is a significant issue for McDonalds when it comes to the product offering vs. more "premium" meals at similar costs. The results are something that McDonalds will have to design a solution for as same story sales year on year are in real decline. Something like 2.6% decline just this past year with little expectation that we will not see continued declines without menu changes.

However, there are other issues which have a different impact on franchise stores vs. corporate stores. The simple truth of the matter is regardless of reason sales are going down at a time when food costs are going up, labor costs are going up, and healthcare costs are going up. In short, today's conditions are suggesting that the owners and stockholders have to invest more for a smaller profit margin and that changes the overall business model.

Just simple fact that when the business model and profit expectations change, we have no choice but as an investor to reevaluate the fundamentals of the company's stock valuation process. In this case we are still talking about a stock that is off on the one year but still well up on the five year. Even though earning per share are off, they are still paying out a profit suggesting that store closings and other strategic changes might salvage the new business model assuming they make additional changes.

It might be a little too early to write McDonalds off simply because of this story alone. They are still trading at $97, they are still profitable, and they still have solid control over their product network distribution programs for both corporate and franchise stores. Their current image and food quality problems they very well might survive from.

 

[DA60]

McDonald's is 'dying' because they are tweeners.

They serve generally unhealthy food in a mediocre way.

Western humanity is slowly getting pickier about what they eat, so just providing middle-of-the-road hamburgers is not enough.

Either go all out, streamline your menu and sell reasonably tasty food at a VERY cheap price OR make delicious hamburgers/fries at a more expensive price. Either way, due to their size, they should be able to undercut the competition (like Walmart does).

Right now, McDonald's does neither. Their food is not super cheap nor super tasty.

 

[Ahlevah]

Talk about boneheaded management. At one point, McDonald's had a 90% ownership stake in Chipotle, but it sold out if it completely by 2006. Smooth move: Sell the company that has a cash-on-cash return of almost 72% (EBITDA of $574,000 for each restaurant against a cost of $800,000) in order to focus on the company that saw year-over-year consolidated revenues decline 11% and operating earnings drop by 28% in its latest reporting period. Based on Chipotle's market cap at Friday's close, that stake would have been worth almost $18 billion. :doh

Chipotle: The One That Got Away From McDonald's - Businessweek

 

[PoS]

Ive heard that McDonalds will start offering all day breakfast menu items like the egg McMuffin (Hong Kong branches have been doing this for decades). If thats true then its a step in the right direction.

 

[austrianecon]

two things....

1) as stated in other post there are underlying issues.

2) Economy is **** for most of their customers and their prices increases haven't helped.

 

[Mach]

A family owned/operated Vietnamese Pho restaurant tastes 20x better and probably ends up costing the same, and if you don't drink the entire bowl is pretty good for you.
"..Mediterranean restaurant..."
".. indian restaurant.." (but probably is pretty bad for you, unless you avoid cream and fried, which means slim pickings!"
"..Thai.."
Jasons Deli
Chipotle
..
We just have more choices these days. McDonalds, as is most fast food joints, is just really bad tasting food. It's terribly low quality that is so manufactured it's surprising they get it to taste as good as it does.
They are in decline the same reason so many old institutions are. We have far more and better choice...just like with network TV. It use to be all there is. Now we have Movie actors moving to TV with incredible long running seasons of absurdly well written/acted TV shows. Sorry, I digress.