Handwriting Was Already On The Wall For McDonald’s CEO Thomson

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Despite McDonald’s CEO Don Thomson making a case for more time to turn the troubled company around last week, the McDonald’s board wasn’t buying it, reports Fortune.

Beth Kowitt of Fortune chronicles the developments since Don Thomson took the helm at McDonald’s in 2012.

McDonald’s US sales declined for the first time in 30 years

As reported by ValueWalk, last week McDonalds unveiled its fourth fiscal quarter earnings results, posting earnings of $1.22 per share on $6.57 billion for the quarter, a 7% year over year decline. Its same store sales in the U.S. dropped 1.7%, which was slightly better than the FactSet consensus estimate of a 2% decline. McDonald’s global same store sales fell 0.9%, also beating the consensus estimate of a 1.6% decline. The fast food behemoth also reported negative global guest traffic in all of its major segments. Comparable sales fell 1.1% in Europe and 4.8% in the APMEA region.

According to Nation’s Restaurant News, this year was the first time in at least 30 years that sales at the company’s U.S. business dropped, ending the longest run ever of domestic restaurant sales growth for a single chain.

Moreover, 2014 became the first year since 2002 that McDonald’s suffered a global decline in sales at outlets open for at least a year.

McDonald’s board appears unimpressed

Beth Kowitt of Fortune recalls Don Thompson’s first earnings call after he was announced as CEO in 2012. When asked about his thoughts on his legacy, he responded: “First of all, I hope that retirement point is quite a few years down the road. Otherwise, that might mean it was induced by something other than me”.

Beth Kowitt also notes that during his year-end earnings calls last week, McDonald’s CEO Don Thompson made the case for more time to turnaround the troubled company. However his board appears to have responded him with a resounding “no”.

Following one of its worst financial years in decades, Don Thomson announced yesterday that he would leave at the end of February and be succeeded by Chief Brand Officer Steve Easterbrook. Beth Kowitt believes Thomson didn’t make this choice by himself. Beth draws attention to Sanford Bernstein analyst Sara Senatore’s note suggesting Thomson was under increasing pressure from investors and the board.

Beth also recalls CNBC’s Jim Cramer saying last week that both McDonald’s and UPS would create value immediately if their CEOs left.

Although McDonald’s nonexecutive chairman Andrew McKenna expressed faith in the fall regarding Thomson’s leadership skills, Beth believes McKenna and his fellow directors were starting to feel the pressure as the press increasingly focused on its role in the company’s struggles.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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