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Perhaps the biggest story of this busy week in the heat of earnings season has nothing to do with corporate earnings reports at all. It is the abrupt departure of McDonald’s (NYSE: MCD) CEO Don Thompson.
News broke yesterday afternoon that the McDonald’s CEO will retire on March 1. With the McDonald’s CEO out so abruptly and a successor already named, I can’t help but think that he was – at the very least – encouraged to retire.
Thompson will retire after 25 years with McDonald’s and more than two years as its CEO. If you’re wondering how investors will react to the news then look no further than how shares performed in yesterday’s after hours trading. Investors sent shares higher by as much as 3.4.% in the after-hours trading session.
Thompson’s tenure hasn’t been a great one.
The chart below shows McDonald’s same-store sales, the all-important metric when it comes to measuring the health of restaurant stocks. The red arrow indicates the period during which Thompson was at the helm of the fast-food giant.
Despite the huge declines in same-store sales, note in the chart below that the stock is essentially flat during that same period. It is very possible that the stock is being propped up by its juicy 3.8% dividend. Considering how low interest rates are and how difficult it is to find safe yield in today’s low-rate environment, it is likely that the yield offered by McDonald’s shares has kept the stock from moving lower.
Meanwhile, competitors Wendy’s (Nasdaq: WEN) and Burger King Worldwide (NYSE: BKW) are up 119% and 137% respectively over the same period.
Whether or not you think the problem with McDonald’s is CEO Don Thompson himself, it’s clear that something has got to change. I personally don’t think Thompson is the problem and that his successor will have his hands full trying to ignite a turnaround.
That said, it seems clear that Thompson is not the leader to execute such a turnaround. If he was, we would already be seeing evidence of its success.
The shares climbed immediately on the CEO news, and I expect even more strength today as investors digest the fact that change is coming.