Steve Mauzy: It happens every five years or so: Bearish analysts put McDonald’s (NYSE:MCD) in their cross hairs and fire. The ammunition is as predictable as the timing: stagnating same-store sales, slowing growth in emerging markets, outdated restaurants, ossified menu, unhealthy fare, lousy service, or some such combination.
McDonald’s has been the target of relentless analyst fire for all of 2015; yet here we are in mid-October and McDonald’s shares are up 10% for the year. This week they hit a new all-time high.
The naysayers mistakenly aim at the small target, but they miss the big picture: McDonald’s formidable brand recognition and performance-oriented culture virtually guarantee long-term success.
On the former, McDonald’s is a top 10 global brand, according to Interbrand, a brand management consultant. McDonald’s ranks ninth on Interbrand’s list, with a $42.3 billion market value. Strong brands have the same effect on consumers that magnets have on metal shavings – they draw them in.
McDonald’s magnetism is especially strong on kids, and not just kids in the United States. Here, I speak from experience. On a weekday road trip from Antibes, France to Geneva, Switzerland, my wife and I stopped at a McDonald’s near Digne, France. We stopped not because of hunger, but because of curiosity. The parking lot was packed. When we walked in, we found a restaurant overflowing with middle-school-aged kids. So much for indomitable French cuisine.
But it’s really McDonald’s culture that magnetizes the brand. As Steve Wynn, chairman and CEO of Wynn Resorts (NASDAQ: WYNN), said in a 2014 Wall Street Journal interview, “You got the culture, you got the problem solved.” McDonald’s has the culture, and has had the culture for decades, so the problem always gets solved.
Stagnating same-store sales has been the problem in 2015, so management doubled-down on value. This past summer, McDonald’s introduced a double cheeseburger and fries for $2.50. The focus on value has won over more customers.
Even more customers will be won over by the latest initiative. Initial indicators point to full-time success for the former part-time breakfast. McDonald’s rolled out all-day breakfast earlier this month. So far, so good: Restaurant traffic has picked up and consumer perception of McDonald’s has improved.