McDonald's faces 'show me' moment with new CEO strategy

Sun May 3, 2015 9:20am EDT
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By Lisa Baertlein

LOS ANGELES (Reuters) - McDonald's new Chief Executive Steve Easterbrook is set to unveil his plan on Monday to revive growth as the world's largest hamburger chain struggles to win back consumers and investors.

He'll be aiming to persuade people such as Janna Sampson, co-chief investment officer at OakBrook Investments, which bought McDonald's (MCD.N: Quote) shares on the cheap more than a decade ago and eventually held more than 7 million shares as the company spiffed up its restaurants, improved service and expanded its menus with things like fancy coffee, salads and wrap sandwiches.

    But Sampson's enthusiasm waned a couple of years ago as quarterly sales at established restaurants started to flag and then fall. In March 2014, OakBrook sold most of its holdings, figuring that McDonald's stock price was too high for a company with no clear strategy for turning its fortunes around.    

"It had not come down enough given the kinds of sales numbers we were seeing," said Sampson. The firm favors companies that dominate their industries, as McDonald's still does.

Easterbrook has described himself as an "internal activist" willing to challenge the status quo to remake McDonald's as a "modern, progressive burger company."

Most financial analysts who cover McDonald's are on the sidelines. Twenty have "hold" ratings on the stock, one is at "sell" and seven are at "buy" or higher, according to Thomson Reuters data.

    They expect Easterbrook to outline more corporate cost cuts, sales of restaurants to franchisees and steps to simplify its menu. He may also elaborate on plans to experiment with customized sandwiches and new mobile technologies. Among options traders, bullish bets on McDonald's turnaround plan picked up last week. [ID: nL1N0XS19N]

Some analysts said Easterbrook has what it takes to overcome McDonald's challenges.   Continued...

A McDonald's 10 piece chicken McNuggets box is photographed at the Times Square location in New York March 4, 2015. 
REUTERS/Shannon Stapleton