By Jason Dean, Ilan Brat and Annie Gasparro
McDonald's Corp. said Chief Executive Don Thompson was leaving,
less than three years into his tenure, and promoted a company
veteran to try to revive the fast-food giant from its worst slump
in more than a decade.
Steve Easterbrook, 48 years old, who started with McDonald's in
1993 and is currently chief global brand officer, will succeed Mr.
Thompson on March 1, becoming the company's third CEO in the past
decade.
McDonald's gave no reason for the abrupt retirement of the
51-year-old Mr. Thompson, who has been with the company nearly 25
years. But it comes after two years of worsening sales declines in
its core U.S. market that have so far defied management's
remedies.
Net income last year fell nearly 15%, to $4.76 billion, and
McDonald's stock has been basically flat since Mr. Thompson took
over in July 2012--a period when the Dow Jones Industrial Average
rose 36%.
McDonald's shares gained more than 3% in after-hours trading on
Wednesday following the news, to $91.60.
A spokeswoman said the retirement, announced after a regularly
scheduled board meeting on Wednesday, was Mr. Thompson's
choice.
"It's tough to say goodbye to the McFamily, but there is a time
and season for everything," Mr. Thompson said in a statement
released Wednesday.
"Steve is a strong and experienced executive who successfully
led our U.K. and European business units and the board is confident
that he can effectively lead the company to improved financial and
operational performance," said Andrew McKenna, McDonald's
nonexecutive chairman, said in announcing the change.
Left unclear for now is how Mr. Easterbrook will address the
broad range of challenges McDonald's faces. In addition to
competition from longstanding rivals like Burger King, McDonald's
is under attack from a host of smaller, more focused "fast casual"
restaurants that are winning younger consumers with fresher and
more customized offerings. These range from burrito chain Chipotle
Mexican Grill Inc., with some 1,700 U.S. outlets as of September,
to upstarts like Shake Shack Inc., a boutique burger joint with 63
locations that is expected to raise up to $109 million in an
initial public offering scheduled to price on Thursday.
The Golden Arches also is wrestling with the effects of its own
expansion over the years, with more than 14,350 locations in the
U.S.--4.6 for every county in the country--and a menu that
executives acknowledge has become so bloated with items that it has
slowed service.
Mr. Thompson's team, including Mr. Easterbrook, has unveiled a
range of proposed solutions in recent months. It announced last
month plans to eliminate low-selling items from its menu, and to
expand experiments with more customized offerings.
That followed a restructuring of its U.S. operations designed to
give regions more autonomy to offer locally tailored products.
This month, McDonald's launched a new marketing campaign in the
U.S. with commercials and food packaging designed to refresh its
longtime "I'm lovin' it" slogan, under Chief Marketing Officer
Deborah Wahl, who joined in March, and McDonald's USA President
Mike Andres, who took over in October.
Still, McDonald's said it expects January same-store sales to
decline, after a 3.6% decline in global customer traffic last year,
including a 4.1% drop in the U.S.
"Don got fatally behind the last couple of years," said John
Gordon, restaurant consultant at Pacific Management Consulting
Group. "And he hasn't presented to the investment community that
he's moving quickly to solve these problems."
Mr. Thompson started with McDonald's as an electrical engineer
in 1990. He led McDonald's U.S. operations in the late 2000s,
helping to spearhead the national rollout of the chain's specialty
coffee offerings in the U.S., and winning over many franchisees and
fellow executives with an affable personality to match his
managerial skills. He was named chief operating officer in 2010,
then became the company's first African-American CEO two years
later.
McDonald's has a history of promoting within its ranks rather
than recruiting outsiders, which comes with the risk that the
changes won't be substantial. But some investors and analysts think
the potential to shake-up the business is still there with Mr.
Easterbrook.
"While Easterbrook is an insider, I think his expertise and
focus on branding, media, and menu should give him credibility in
the areas that McDonald's is most needing change and improvement,"
said Will Slabaugh, restaurant analyst at Stephens investment
bank.
Investor Bill Smead, CEO of Smead Capital Management, said Mr.
Easterbrook's role in Mr. Thompson's management team doesn't mean
the two men share the same approach.
"I think Don [Thompson] just wasn't inspiring the franchisees or
people around him in the way that they needed to be," said Mr.
Smead, whose firm owns about 168,000 McDonald's shares.
Mr. Easterbrook, who was born in the U.K., has zig-zagged
through McDonald's corporate leadership roles, starting in London
as a financial reporting manager in 1993.
He climbed the ranks of its U.K. operations and in September
2010 was named the top brand officer. After just a few months, he
took over as the president of the company's European
operations--then left McDonald's less than a year after that.
He then served stints as CEO of two British restaurant chains,
PizzaExpress Ltd. and Wagamama Ltd., before returning to McDonald's
in June 2013 to head up global brand operations once again.
Last March, McDonald's broadened Mr. Easterbrook's
responsibilities to include oversight for corporate strategy and
the restaurant solutions group, which comprises restaurant design,
innovation, training and other operations.
Mr. Easterbrook has been vocal about McDonald's need to make
itself attractive again to "millennials," often defined as the
group born between 1980 and 2000, who are now in their mid-teens to
mid-thirties. That age bracket once was a core demographic for the
chain.
Millennials "want to buy into a brand not just from it," he said
in an interview with The Wall Street Journal last summer. "What
we've got to do is find interesting and engaging ways to share that
information with millennials, not old-fashioned corporate
lecturing."
Also on Wednesday, McDonald's appointed Google executive Margo
Georgiadis to its board, representing a push to improve digital
capabilities and connect with younger consumers.
Mr. Thompson took the helm after nearly a decade of prosperity
led by Jim Skinner. Mr. Skinner became CEO in 2004, in the wake of
McDonald's last big business downturn.
Mr. Skinner helped turn around McDonald's U.S. operations, which
had been suffering from overexpansion. Under his tenure, he slowed
new-store openings and focused on improving the company's
operations. McDonald's steered through the recession relatively
unscathed, partly by rolling out coffee nationwide, which helped
make the company one of the most successful restaurant chains at
the time.
By Mr. Thompson's appointment as CEO in March 2012, McDonald's
stock price had nearly quadrupled since 2003 on strong revenue and
profit gains.
Write to Jason Dean at jason.dean@wsj.com, Ilan Brat at
ilan.brat@wsj.com and Annie Gasparro at annie.gasparro@wsj.com
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