McDonald's Corp. (MCD) Falls (But Not Much) on Announcement of All-day Breakfast

Shares of Oak Brook, Illinois, based McDonald's Corp. (MCD) fell on Tuesday, but at only about half the rate of the general stock market, which had it's third worst trading day of the year, and was down accross the board. McDonald's stock was down 1.63%, falling $1.55 per share, to close at $93.47, on volume of 7,308,379 shares. The news media is reporting that the company will be offering breakfast all day at many of its restaurants.

Market tests conducted earlier this year indicated a consumer preference for the restaurant chain's popular breakfast menu.

Founded in 1955, McDonald's Corp. is engaged in providing prepared meals on a retail basis. It operates more than 35,000 restaurants worldwide, and is one of the largest "fast food" chains in the world. The company largely operates its restaurants as franchises, and offer well-branded food items including hamburgers and cheeseburgers, french fries, salads, ice cream shakes and sundaes, pies, and a full menu of breakfast meals, as well as soft drinks. The company franchises restaurants in most of the major countries around the world. The company's stock trades on the NYSE.

McDonald's will begin offering all-day breakfast items and meals at more than 14,000 of its restaurants beginning on October 6. The move is a response to weakening sales in recent years. Though McDonald's stock fell by 1.63% on the news on Tuesday, that decline was only about half the decline of the general stock market, where the major indices where down about 3% across the board.

The company began test marketing all-day breakfast in March, a move that was welcomed by the chain's customers. The move was approved last week in a vote by franchisees, and affirmed on by the franchisee leadership council on Tuesday. It is part of an overall strategy by McDonald's Chief Executive Officer, Steve Easterbrook to improve the company's image and product line with consumers, who seem to have been growing weary of the company's current menu offerings, many of which have been sold by McDonald's for decades. Easterbrook took over as CEO on March 1.

As part of the planned improvement for the company, McDonald's also plans to close approximately 700 stores, and will experience a net decline of stores in the US, the company's home country and its largest market. In addition, the company will revise or eliminate some of the many menu items currently available, in order to streamline operations, make room for breakfast items, and create a less confusing menu for its customers.

Up to this point, breakfast was only available at McDonald's until 10:30 in the morning, when restaurants would shift to the lunch/dinner menu. It is not clear how the company will handle the transition from one meal type at a time to a more universal menu offering. Both equipment and processes involved in meal preparation are significantly different between breakfast meals and lunch/dinner meals. Nonetheless, it is generally felt that the switch to all-day breakfast will be the initial change in the menu that will ultimately result in other constructive changes.

McDonald's stock was rising in after hours trading Tuesday night.

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Published on Sep 2, 2015
By Kevin Mercadante

Copyrighted 2016. Content published with author's permission.

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