Market Overview

McDonald's New CEO Has Big Clown Shoes to Fill


It was revealed on Thursday that McDonald's (NYSE: MCD) CEO Jim Skinner would be retiring later in 2012, and the company's president Don Thompson would be taking over.

While Thompson undoubtedly deserves his chance, he faces a tall task replacing Skinner, a man who has guided the biggest fast food chain in the world to unprecedented heights.

According to USA Today, Skinner has been CEO since 2004, though he has been with MCD for 41 years. While in the top job, he has seen MCD stock roughly triple in price. Burger King (NYSE: BKC) and Wendy's (NASDAQ: WEN) are battling for second spot, but they remain a long, long way behind MCD, and that is largely thanks to Skinner in recent years.

Thompson has been with the company for 22 years himself, and he has been responsible for global strategy and operations in more than 33,000 restaurants in 119 countries. He will take over as CEO on July 1, and he will be immediately faced with the challenge of maintaining the momentum set by Skinner.

In a research report published on Thursday, J.P. Morgan said that Skinner's tenure has been an exceptional one for shareholders; since his appointment, the stock has appreciated ~230% vs. 19% for the S&P. It has also always been impressed with Don's thoughtfulness, energy, enthusiasm, strategic vision, and command of all aspects of McDonald's store level and corporate businesses.

“We fully expected Don to be named CEO upon Jim's retirement. Don, the company's well known President and COO is currently 48 years old, and we expect he could be CEO for the next 10+ years. Even the timing of this announcement was expected, just in front of the biennial owner/operator convention to be held in Orlando in April.”

Goldman Sachs said that it sees Skinner's departure as a meaningful loss for MCD, as results under his stewardship were extraordinary. “(1) global same-store sales averaged 5%-6% throughout the period despite the impact of the global financial crisis, (2) operating margins expanded from 19% to 31% despite ongoing food cost inflation, and (3) FCF conversion averaged 90% and the dividend was increased by an average of 25% per year.

Deutsche Bank reported that MCD has had a tremendous run of success under Skinner, with consistent, positive sales and earnings performance against a variety of economic backdrops. “While these are some big shoes to fill, we do not expect this mgmt. change to impact the momentum MCD has gained under the leadership of Skinner.”

Posted-In: Analyst Color News Management Analyst Ratings Best of Benzinga


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