McDonald's quarterly profit plunged yet again, but investors are betting on a turnaround under new CEO Steve Easterbrook. Fred Katayama reports.
McDonald's just can't recover its sizzle. Quarterly net profit and revenue fell sharply and were down even after accounting for the negative impact of a strong dollar. Promotional offers failed to pull in more customers in the U.S. Comparable sales fell more than 2 percent globally and in the U.S. McDonald's was slammed even harder in Asia where a meat supply issue last summer has hurt sales in China, and a french fry shortage stung Japan. McDonald's has been losing share to fast casual restaurants that offer fresher, healthier fare that attracts Millennials. Steve Easterbrook, who just became CEO last month, is shaking things up. He just launched a test of all-day breakfast, and he will soon add premium burgers to the menu for a limited time. And he has moved to curb use of antibiotics in chicken. Easterbrook said today McDonald's is employing founder Ray Kroc's business philosophy of taking calculated risks. Investors seem to be likin' it, for McDonald's shares have outperformed the Dow in the last three months. And they're up again in early trading despite a warning that comparable sales this month would be negative. Morningstar analyst R.J. Hottovy said Easterbrook's statement about taking risks helped lift the stock, adding, "It was not surprisingly a disappointing quarter. The market is focused on what Easterbrook will say to tip his hand about his turnaround strategy." McDonald's said it will reveal those details next month.