McDonald’s is Slashing Costs, But Can it Do More?

© Ben Gabbe/Getty Images
© Ben Gabbe/Getty Images

As McDonald’s  (MCD) embarks on a prolonged plan to regain momentum and set its restaurants up for more growth, CEO Steve Easterbrook said the company has “stretched” itself with its cost-cutting program.

Easterbrook shed some light on its financials in an interview with CNBC’s “Squawk on the Street.” A day earlier, the company provided an update on its turnaround plan during about four hours of presentations for its investor day. As part of the update, it boosted its net annual general and administrative expense savings target to $500 million, the vast majority of which the chain will realize by end of 2017.

Its stock price was up slightly on Wednesday.

But can the Golden Arches do more?

“No we’ve stretched ourselves, and that’s a net savings number because we’re going to continue to invest in the business,” Easterbrook said.

“What we don’t want to do is impact our ability to grow, and we do not want to disrupt the momentum we’re seeing in the business because that is where the greatest value creation is for all stakeholders, including shareholders,” he added.

While the chain also seriously considered a REIT as part of its financial review, ultimately the decision against the idea was “absolutely unanimous,” Easterbrook said.

As the company ups its refranchising target to 4,000 restaurants through 2018, Easterbrook cautioned against thinking its hefty 3 percent dividend could be in trouble.

“We generate a substantial amount of cash,” he said. “We will have substantial funding for dividends as well.”

Written by Katie Little of CNBC

(Source: CNBC)

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s