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Can McDonald’s Corporation (MCD) Be Fixed And Would Shareholders Have The Stomach For It? Peltz, Ackman Weigh In

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There’s no doubt that while McDonald’s Corporation (NYSE:MCD) is an American icon, it is in trouble. While the fast-food behemoth is working on turning around its fortunes by being more efficient and trimming its extensive menu, Trian Partners’ Nelson Peltz and Pershing Square’s Bill Ackman say that the road to recovery is still a long and hard one for McDonald’s. In the first quarter of the year, the burger-and-fries giant missed earnings expectations of $1.06 per share, reporting EPS of $1.01 per share while marking yet another quarter of declining global same-store sales, which fell by 2.3% in that period. In May, the firm said that there was a 0.3% fall in global comparable sales driven by a 2.2% decline in the U.S. and a 3.2% drop in the Asia-Pacific, Middle East, and Africa regions.McDonald's Corporation (MCD), NYSE:MCD, Yahoo Finance, Bill Ackman, Nelson Peltz, Hedge Fund:163, Hedge Fund:13

Peltz, at an investment conference in New York on Wednesday, said that he would be interested in helping the golden arches reclaim shine again; if only he wasn’t a competitor that is. Peltz is the chairman of Wendys Co (NASDAQ:WEN).

Nelson Peltz
Nelson Peltz
Trian Partners

The billionaire activist investor – who, at the same conference, disclosed that Trian has two new big activist targets accounting for a third of the firm’s entire portfolio – told the crowd that McDonald’s Corporation (NYSE:MCD)’s mindset should be “turned upside down”. He added, however, that he does not know whether the company has the stomach to do it or whether shareholders will be patient enough to see the giant pull through the years necessary to make it happen.

Fellow billionaire activist Bill Ackman agrees with this sentiment, as he said during the conference that he actually suggested about a decade ago that McDonald’s Corporation (NYSE:MCD) should franchise most of its locations. The fast- food giant did try to go with Ackman’s plan, but not fast enough it seems. The billionaire and his hedge fund Pershing Square found a more cooperative partner in franchising most of its stores in Burger King. Restaurant Brands International Inc (NYSE:QSR), the parent of Burger King, saw its share price increase by 15.58% in the past year. Burger King, according to Ackman, was in a “much worse place” than McDonald’s is currently in. He added that “The store base was a disaster, they had something like 13 CEOs in 25 years.”

Bill Ackman
Bill Ackman
Pershing Square

Over the last 12 months, McDonald’s stock has declined by 1.5% while other rivals such as Yum! Brands, Inc. (NYSE:YUM) and Wendys have grown by 7.61% and 26.84%, respectively. Newcomers like Chipotle Mexican Grill, Inc. (NYSE:CMG) are also leaving McDonald’s in the dust. In the past year, Chipotle’s stock has grown by 10.8%. In the last five year’s, Chipotle’s stock has soared by 371.47% while McDonald’s saw a relatively measly 42.73% share price climb. Chipotle is one of the darlings of the fast-casual dining restaurants group, which have attracted more and more people away from traditional fast-food giants like McDonald’s by offering menu items usually perceived as more healthy to an ever growing, health-conscious market.

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