McDonalds Corp. (MCD) - Get Report shares slumped to the lowest level in more than six months Monday, hiving more than $4 billion from its market value, after the world's biggest restaurant group lost two senior executives in a matter of hours following the revelation of an improper relationship between CEO Steve Easterbrook and a company employee.
Easterbrook, 52, who has led the group since 2015, stepped down as CEO Sunday after admitting he had made a "mistake" in pursing a relationship with a colleague which, while consensual, violated company policy. His departure was followed by the resignation of David Fairhurst, McDonald's head of human resources, and the appointment of Americas division boss Chris Kepmczinski as group CEO.
Kepmczinski first task will be to arrest the slowing U.S. comparable sales, which rose 4.8% from last year over the third quarter but were down from the 5.7% pace notched over the three months ending in June. Last month, in fact, McDonald's reported weaker-than-expected third quarter earnings linked in part to softness in its domestic U.S. business.
"Practical implications in the near term are more related to perception than reality," said BMO Capital Markets analyst Andrew Strelzik, who carries a $225 price target and an 'outperform' rating on the stock. "We would not expect an impact on operational performance in the near term given McDonald's solid management bench, strong operational momentum, and strategic/ operational initiatives already in place to drive performance in coming quarters."
McDonald's shares fell 2.7% Monday to close at $188.66 each, the lowest since early April and a move that would loped more than $4 billion from the group's market value on Friday afternoon.
Easterbrook's departure also adds a level of uncertainty to a stock that is now only 6.25% higher for the year, compared to a 15.7% gain for the S&P 500 restaurants sub-index, and is facing increasing competition from fast-moving restaurant chains such as Chipotle Mexican Grill (CMG) - Get Report , plant-based menu options at Restaurant Brands Internaitonal's (QSR) - Get Report Burger King and food delivery accelerations from ride-sharing group Uber Technologies (UBER) - Get Report
"McDonalds has a talented bench," said Credit Suisse analyst Lauren Silberman. "We expect management and the board have a like-minded strategy, and view momentum as sustainable despite Easterbrook's departure."
"In his role as President of McDonald's USA, Kempczinski co-authored the Velocity Growth Plan, and we would not expect any meaningful changes to the strategy, noting he was instrumental in the development of the future growth drivers, with implementation and execution now the focus," she added.