McDonald's Needs to Improve on Its 'Super' Message

NEW YORK (TheStreet) -- If you look at the top 10 favorite ads among viewers during the Super Bowl you won't see McDonald's (MCD) on that list.

At this year's most important American football championship game, the cost of these TV ads was somewhere around $4 million for a 30-second piece. McDonald's joined the battle to grab the attention of the masses but, alas, the ad didn't even make the top 12 list of ads that were watched online or on TV when it comes to the number of views. It didn't do enough to make viewers "feel good."

You could say the company is having the same problem when it comes to its menu -- which even the company's chief operating officer admitted has become too complicated -- and its shares.

Shares of MCD closed Monday 1.2% lower at $93, off about 4% for the year to date. MCD shares are close to the bottom of its narrow 52-week range of $92.87, compared to a high of $103.70. Having reported flat earnings per share and revenue Jan. 30, the stock seems to be mirroring the same-store sales that have declined for two quarters in a row.

Let's look at a five-year price chart of this top-tier fast-food empire that comprises about 35,000 stores globally. I'll include in the chart some very important financial metrics that tell a good part of the story.

MCD ChartMCD data by YCharts

From the viewpoint of a shareholder, the last five years the stock has nearly doubled, powered by both the growth in its trailing 12-month (TTM) free cash flow and a higher-moving quarterly revenue-per-share performance (red line above). We pay our respects to CEO Don Thompson and his team, who took over the leadership of MCD in the middle of 2012, for trying many innovations to keep the strong sales growth and stock price momentum going that their predecessors forged during the prior eight years.

But while the company whipped up a dazzling array of food items, Chief Operating Officer Tim Fenton admitted during Thursday's conference call, "We overcomplicated the restaurants and didn't give [them] an opportunity to breathe," referring to the menu experiments over the past 18 months.

He put the possible solution in these words, "We need to do fewer products with better execution." To learn more about the company's plans to revamp its focus and also the details of its last quarterly financial results take a good look at its user-friendly Web site.

Still, investors should feel somewhat sanguine. It pays to feel good about MCD's stock at these levels because the current dividend yield-to-price is nearly 3.5%. That compares favorably with the average yield on the S&P 500 and the 10-year U.S. Treasury bond which for now has fallen below 2.6%. Then there's the upbeat assessment and awareness reflected in the CEO's comments last week.

"Around the world, we are focused on providing the menu quality and choice, customer service and affordability that are the hallmarks of the McDonald's experience," said CEO Thompson. "We remain confident in the fundamental strength of the McDonald's System and our ability to drive initiatives that will deliver the greatest benefit for our customers."

By the way, the company ad that stole more hearts during the Super Bowl, both online and during the big game, was the "Puppy Love" ad by Anheuser-Busch InBev (BUD). That's the one with the determined golden puppy and the famous BUD Clydesdale horses. It was a great "feel good" ad.

McDonald's will need to do the same with its ad messages and its determination to follow through on its CEO's promise to focus on the kind of menu "quality and choice" that customers will remember and consistently come back to enjoy.

I'm becoming more convinced that shareholders will be smiling in the year ahead as the leadership of MCD learns from their mistakes and makes good on their intentions.

At the time of publication the author had no positions in any of the companies mentioned in the article.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial writer and editor, he specializes in unique investment strategies, growth with income stocks, overlooked investment themes, tax-advantaged themes, risk management, technologies to capture gains and reduce losses, real estate related opportunities,effective wealth preservation techniques, and the use of ETFs for diversification and asset allocation. He also follows and frequently writes about technology, health sciences, energy and resource companies. Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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