Shares of McDonald’s tumbled nearly 3 percent on Monday after the fast-food giant over the weekend revealed the surprise exit of its popular executive Steve Easterbrook over a “consensual relationship” with an employee that violated company policy.
Easterbrook’s ouster was followed Monday by the departure of the burger giant’s “Chief People Officer” David Fairhurst. McDonald’s didn’t say whether Fairhurst’s departure was connected to the firing of Easterbrook.
The departure of Esterbrook, who had doubled the company’s stock since he took over in 2015, has Wall Street wondering whether the burger chain’s multi-billion dollar strategy to boost sales could change under the new head.
Under Esterbrook, McDonald’s spent billions to modernize stores, add digital kiosks and automate parts of the ordering process. He was credited with franchising 95 percent of McDonald’s US fleet, launching the popular all-day breakfast, revamping restaurants and making tech acquisitions to remodel stores.
Chris Kempczinski, who was in charge of McDonald’s operations in the United States, took over from Easterbrook on Sunday. Piper Jaffray & Co on Monday downgraded the stock to “neutral” from “buy”, citing the likely disruption from a sudden change of this magnitude.
“Our experience leads us to take a more cautionary view noting the potential lack of momentum and time involved in formalizing a new team,” analyst Miller Regan said.
Kempczinski has inherited the top spot at the world’s largest fast-food chain when its struggling to bring in more customers at its restaurants amid a shift to healthier food choices and delivery apps available at their finger tips.
“Easterbrook was a change-agent at McDonald’s and his leadership, particularly in the face of difficult decisions … will be missed,” Wells Fargo analyst Jon Tower said.
For Kempczinski, a Harvard alumnus, the biggest challenge will be rapid changes in the industry and the push to grow restaurant traffic, especially after McDonald’s remodeling investments, a switch to fresh beef and cheaper menu items that weighed on margins and service time.
“We are unsure how McDonald’s strategy might change under Kempczinski’s leadership as most major initiatives are already well underway,” said BTIG analyst Peter Saleh.
Shares of the company were down 2.6% at $188.59 in early trading.
With Reuters
