As its challenges mount, restaurant watchers are wondering: can the Golden Arches turn it around?
More than seven decades after it first began flipping burgers, McDonald's will unveil on Monday a highly anticipated plan to juice company results and modernize the fast food giant's struggling operations.
Although McDonald's remains the world's biggest fast food chain, the burger behemoth has struggled to stabilize and improve its results for the past several quarters. In a video, news release and conference call, the Golden Arches plans to shed light on its battle plan for a "growth-led turnaround" and financial outlook.
In particular, the focus will be on the company's weakest markets. U.S., France, Russia and Japan have all presented persistent problems for the company. Germany and China have also generated negative trends, but have shown signs of improvement recently.
"Everyone wants to hear a plan to get sales back on track," said Matthew DiFrisco, senior restaurant analyst at Guggenheim Partners. "I think they're going to be more aggressive in trying new things."
The company faces an uphill battle in turning around sales due to macro headwinds in Europe, lingering fallout from a supplier issue last summer in Asia and shifting consumer tastes and fierce competition in the U.S. A strong has also hit the Golden Arches hard, crimping sales and demand in foreign economies.
After a long string of positive comps during the recession, McDonald's performance has flagged in recent quarters. The chain hasn't delivered positive same-store sales since first quarter 2014 globally, and third-quarter 2013 domestically, according to FactSet data.
McDonald's bulls are pointing to new CEO Steve Easterbrook as a catalyst for change, though. Easterbrook has already signaled he's willing to make some tough decisions. Hundreds of restaurant closures are in the works, and the CEO has indicated more menu cuts are on the way, following an earlier slimming announced this year.
While on his watch, McDonald's USA is testing out all-day breakfast and is in the process of removing human antibiotics from its chicken supply within the next two years.
As it seeks to be more relevant to customers, McDonald's has also pledged to focus on customers' desire for customization of food, and to drive demand with new national and local menu products.
"There's a lot of things we'd like to see McDonald's concentrate on," said Janney Montgomery analyst Mark Kalinowski in a phone interview.
One possibility could also be for McDonald's to buy back shares.
"We'd like to see more re-franchising from McDonald's both in the U.S. and abroad," Kalinowski added.
Currently, more than 80 percent of McDonald's restaurants are owned and operated by franchisees. Other restaurants who have taken a more heavily franchised approach, such as Burger King, have seen earnings increase.
DiFrisco thinks the company will increase its portion of franchised restaurants and increase shareholder returns—most likely through buybacks.
In many ways, McDonald's remains in an enviable position. The company maintains strong free cash flow, and generates large average store volume.
"I think at the current valuation it does seem to be one of the more compelling names out there in the long term," says DiFrisco, who has a "buy" rating on the stock.
Wall Street in general is less enthusiastic, with the average rating being a "hold," according to FactSet.