Update: Thoughts On McDonald's Investor Discussion

| About: McDonald's Corporation (MCD)
This article is now exclusive for PRO subscribers.

Summary

We wrote an update a couple of days ago reiterating that we believe McDonald's is in trouble.

McDonald's hosted an investor discussion webcast the next day.

These are our thoughts and updated investment thesis.

By Parke Shall

Just two days ago we wrote an update on our original piece on McDonald's Corp. (NYSE:MCD). Our update emphasized that we continue to stand by our original price range for McDonald's around $74-$82. Wednesday morning, the company's execs were on the spot during an investor discussion webcast. Some of the details of which were disseminated by Seeking Alpha during the day:

· McDonald's execs were on the hot seat at an investor meeting after a string of disappointing global sales reports.

· CEO Don Thompson promises "comprehensive" changes after acknowledging some failures with the Dollar Menu and menu overload.

· Top priorities for the chain will be winning the burger war and becoming a favored family destination once again by tying into community events.

· The disparity between premium pricing and the lower pricing points is seen as a weakness which needs to be fixed.

· Store execution will be improved by "re-inventing" its training regiment and reallocating labor.

· McDonald's will introduce a new slimmed-down menu shortly that is says will help improve speed of service in stores and for drive-through customers.

Before we address each of these key points, we want to point out that nothing that we head during the investor discussion today changes our mind about how we feel about the fast food chain.

We believe that the issue of menu overload is a serious one, and that "less in more" in these circumstances. We like the idea of simplifying the menu in order to provide operational efficiency and to make life easier for the customer, who has clearly been overwhelmed with the amount of choices that McDonald's is now offering; especially for a fast food business.

Winning the burger war may be one of the better things the company can focus its energy on. McDonald's competes directly with names like Burger King Worldwide (BKW) and The Wendy's Company (NYSE:WEN). As the amount of customers continues to decline as people of our generation move more towards a healthier lifestyle, McDonald's could focus on making sure that they're the best destination for those that decide to eat fast food on their cheat days.

Focusing on their part of the consumer segment, instead of trying to expand into a segment where they don't necessarily belong could be a far more prudent strategy for McDonald's.

To add to what we stated a couple of days ago, we also believe that the idea of ordering kiosks and re-training its staff for efficiency changes will help several quarters down the line. When trying to grow a company as established as McDonald's, sometimes you need to make cuts in addition to growing the top line. We feel this is a common sense way to do so. While our outlook for the short term hasn't changed; we're sticking by our price targets into 2015, we do believe today could mark the first suggestion of a company taking the very first step to acknowledging their problem the right way and making the correct moves towards addressing it. We continue to have no position in McDonald's and would likely not consider one until such time as we see actually progress being made on the P/L.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.