Tags: steve easterbrook | mcdonald | ceo | performance

Steve Easterbrook: Assessing McDonald CEO's Performance

hand holding big mac in front of mcdonald's corporate logo sign
(Getty Images/Paul Richards)

By Friday, 14 December 2018 04:59 PM Current | Bio | Archive

With so many moving parts, it might seem like a business runs itself. But the person at the top matters a great deal. The leadership (or lack thereof) of the Chief Executive Officer can have a huge effect on whether a company succeeds or fails. A great CEO can lead his or her company to the top of its industry, while a company can fall behind the pack under a mediocre or poor CEO.

Steve Easterbrook has been with McDonald’s (MCD) for over 20 years, including the last three years as the company’s Chief Executive Officer. As CEO, Easterbrook brought McDonald’s out of a multi-year slump, characterized by sluggish sales and restaurant closures.

Under Easterbrook’s leadership, McDonald’s has seen a remarkable turnaround, proving once again the value of a great CEO.

Career With McDonald’s

Steve Easterbrook’s career with McDonald’s began in 1993 as a Financial Reporting Manager in London. He worked his way up to President and CEO of McDonald’s UK, before becoming Global Chief Brand Officer in 2010. Later that year, he was promoted to President of McDonald’s Europe. Easterbrook briefly left McDonald’s for various leadership positions at other companies, but returned to his role of Global Chief Brand Officer in 2013. In 2015, he was named CEO of McDonald’s.

Easterbrook took the helm at a difficult time for McDonald’s. Under the previous CEO, McDonald’s entered a downturn. Upstart quick-service competitors in the U.S. like Chipotle had grabbed market share from McDonald’s, which struggled to adapt to changing consumer preferences. Also, new “better burger” restaurants like Shake Shack, Five Guys and others were gaining momentum. In 2015, McDonald’s announced it would close more stores than it opened in the U.S., the first time that had happened in over 40 years. This directly impacted McDonald’s profits. Earnings hit a high of $5.55 per share in 2013, but by 2015 had fallen 13.5%.

Getting Back On Track

After Easterbrook took charge, he pioneered McDonald’s through multiple sweeping changes. Just a few of the initiatives put in place under Easterbrook’s tenure include all day breakfast, new menu offerings, and a major investment in technology. Last year, McDonald’s rolled out McDelivery with UberEats to nearly 8,000 restaurants, with more to come. McDonald’s has also released its own app, in which customers can place orders and pay. Mobile order and pay were rolled out to over 20,000 restaurants last year. Investments in technology will help cut down on order wait times and improve the overall customer experience.

The other major growth catalyst that Easterbrook spearheaded for McDonald’s was accelerating franchising of its restaurants. Franchising is attractive for restaurants, as it provides a steady stream of cash flow while placing most of the maintenance, operating, and tax expenses onto the franchisee. The impact of franchising is that it greatly expands profit margins for restaurants. Indeed, McDonald’s earnings rose at a 15% average annual rate in the years since Easterbrook became CEO. Franchising has played a big role in McDonald’s return to growth.

In the most recent quarter, McDonald’s comparable sales increased 4.2%, reflecting strong growth at restaurants open at least one year. Earnings rose 19% to $2.10 per share, thanks largely to higher franchise fees.

The Results Speak For Themselves

McDonald’s has enjoyed a resurgence in recent years, due in no small part to the leadership of Steve Easterbrook. Shareholders have benefited right alongside the company. McDonald’s is a Dividend Aristocrat, and has increased its dividend each year for over 40 years. Shareholders have enjoyed strong dividend raises with Easterbrook as CEO, including a 15% hike earlier this year.

If an investor purchased shares of McDonald’s the day Easterbrook became CEO, his or her investment more than doubled in value, assuming reinvested dividends. McDonald’s has drastically outperformed the S&P 500 Index in that time, proving that Easterbrook has enjoyed a successful tenure as CEO of McDonald’s.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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McDonald’s has enjoyed a resurgence in recent years, due in no small part to the leadership of Steve Easterbrook.
steve easterbrook, mcdonald, ceo, performance
Friday, 14 December 2018 04:59 PM
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