Copyright 2012, Chicago Tribune. All Rights Reserved.
McDonald’s Corp. sent a strong signal to Wall Street and the company that a recent slide in U.S. sales isn’t being taken lightly, announcing Thursday that it is replacing the head of its U.S. business with another longtime company veteran who is charged with overseeing a massive remodeling of its restaurants worldwide.
Jan Fields, 57, who has been with the company more than 35 years, will be succeeded by Jeff Stratton, also 57, currently global chief restaurant officer. The change is effective Dec. 1, McDonald’s said.
“This was a business decision,” said McDonald’s spokeswoman Heidi Barker Sa Shekhem. She added that Fields and new CEO Don Thompson had “some long discussions about the state of the business and the decision was made that it was time to make a change in the leadership of the U.S. business.”
Last week, McDonald’s reported that U.S. same-store sales declined 2.2 percent during October because of increasing competition as well as sluggish demand in the U.S. The drop in year-over-year sales was the first in nine years, although sales have been decelerating throughout 2012.
Sa Shekhem emphasized that the decision was not made based on one month of sales, but looking at the total business with an eye on the future.
As McDonald’s has struggled, hamburger competitors such as Wendy’s and Burger King have shown signs of resurgence with the addition of new products. The world’s largest restaurant chain is also seeing competition at breakfast from Starbucks, Dunkin’ Donuts and Subway, with chains like Panera and Chipotle posing threats later in the day.
The same-store sales decline and the departure of Fields are two of the most visible developments since the ascension of Thompson, who took over as CEO in July.
“I’m a little disappointed in this move because it feels a little bit like Wall Street analysts driving this,” said one McDonald’s franchisee who asked not to be named.
While the chain has reported smaller increases and the first sales decrease, the franchisee said, “We came off nine consecutive years, and I’ve experienced it all, and Jan was a big part of that.”
R.J. Hottovy, an analyst with Morningstar, said “it’s tough to read” into the reasons behind Fields’ departure, but the shake-up won’t affect his short-term view.
“I still think the company is going to have a difficult next several months,” he said, adding that “2013 is going to be a better year.” He pointed to expected abatement in food costs and a “stronger pipeline” for new products.
McDonald’s has announced several tests for 2013, including wrap sandwiches, egg whites on breakfast sandwiches and grilled chicken in Happy Meals.
Hottovy added that he also expects sales to increase when the U.S. remodels more of its restaurants, a massive program well under way.
Darren Tristano, executive vice president of Technomic, said the chain has been seeing increased competition and that consumers are still watching small purchases very closely. But for McDonald’s, after nine years of increasing sales, they could be hitting a ceiling, he said.
“At some point you look at $2.5 million (in sales per average U.S. McDonald’s), and they’re doing pretty well,” he said. “Unless you do a double-decker drive-thru and a second kitchen, there’s a level of efficiency they’ve hit that you have to look and say ‘How big can a restaurant get?'”
Despite increased competition, McDonald’s thoroughly dominates the burger market, with a 49.5 percent share of the $65.4 billion segment, as measured by Technomic in 2011. Burger King and Wendy’s had 13.3 percent and 12.8 percent shares, respectively, at the time.
Fields became president of the U.S. business in 2010, succeeding Thompson. She previously was chief operating officer of McDonald’s USA, stepping into that role in 2006. Fields is a 35-year veteran of McDonald’s who began her career with the company behind the restaurant counter.
Her legacy as U.S. president includes a number of health-and-wellness initiatives, including fruit or vegetables in every Happy Meal, pushing to cut sodium levels in the food, and posting calorie counts on menu boards.
As global chief restaurant officer, Stratton has been charged with keeping McDonald’s decade-long, multibillion-dollar global renovation and rebuilding project on track. Restaurants undergoing simultaneous interior and exterior remodels are expected to see a 6 to 7 percent increase in same-store sales upon reopening, no matter where they are located.
Shares in the company closed Thursday at $84.05, down less than 1 percent.