McDonald's defend plans despite slump

The chief executive of fast food giant McDonald’s has defended his company’s plan for reviving lacklustre US sales after analysts panned it and shares sank to yet another seven-year low.

With more investors urging McDonald’s to shake up top management, chairman and CEO Jack Greenberg said the company is “on the verge of a national value campaign in the US that will help us reclaim our industry leadership”.

“Let me assure you that our brand and our worldwide system are strong, and so are the plans to turn our performance around,” Mr Greenberg said in a brief statement.

Pressure on McDonald’s to end a two-year slump intensified after the company issued a profits warning on Tuesday in the wake of summer sales that were lower than a year earlier in restaurants open at least a year.

A day after a 13% drop that marked its worst since the 1987 stock market crash and second-biggest ever, McDonald’s shares yesterday fell another 4% on the New York Stock Exchange.

For the second straight day, it was one of the most active trading days in McDonald’s history, with 19.5 million shares bought and sold.

Securities brokerages cut their outlooks or downgraded McDonald’s, and several analysts said they saw little hope of improvement in the near future.

“Over the last 10 years, we have never witnessed so much scepticism surrounding the company,” said Howard Penney in a report for SunTrust Robinson Humphrey.

“With no significant changes made to senior management business philosophy, we feel it is unlikely that the company will turn around any time soon.”

McDonald’s stock price has lost about 70% of its value since Mr Greenberg was named to the top job in 1998.

A shrunken economy, tougher challenges from competitors, and beef safety scares abroad all have contributed to the slide, along with increased complaints about poor service.

Some see the decline as troubling but temporary.

“Despite the sombre news ... the prognosis for improved US sales trends remains encouraging,” said Merrill Lynch analyst Peter Oakes in a report for investors. “We fail to detect any structural barrier preventing the company from eventually regaining past glory.”

But he added that when it comes to management strategy, “a greater sense of urgency would go a long ways”.