McDonald's Just Served Up a Supersized Plate of Concerns to Investors

Beleaguered burger giant McDonald's (MCD - Get Report) reported a challenging earnings report on Wednesday, putting the pressure on its new CEO Steve Easterbrook to serve up more details on a turnaround plan. Initially, there was some confusion on Wall Street as to what the Golden Arches reported in terms of earnings. Net earnings came in at 84 cents a share, which included a 17 cents-a-share hit from strategic charges stemming from the closure of 220 underperforming restaurants in the U.S., China, and Japan, and the negative impact from foreign currency of 9 cents a share.

Excluding the strategic items and the impact of the strong dollar, McDonald's earnings came in at $1.01 a share, not as bad as initially thought, but still below the adjusted consensus forecast of $1.06 a share. "Turnarounds are often bumpy in nature, and they require bold decisions," admitted McDonald's CEO Steve Easterbrook, who has seven weeks into holding the top job at the company. In addition, McDonald's sluggish April sales may mean it has felt an impact from Yum Brands' (YUM) relentless focus on breakfast at its Taco Bell division. In recent weeks, Taco Bell has launched four new varieties of its Biscuit Taco, and poked fun at McDonald's Egg McMuffin in multiple high-profile TV commercials. Sales of breakfast are about 25% of McDonald's U.S. business and have continued to be a solid performer, even as the rest of the menu has fallen out of favor with consumers.

Source: The Street

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