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McDonald’s Bullish Despite a Bearish Economy
McDonald’s CEO Jim Skinner focused on the positives at this year’s annual shareholder conference.

Given the tumult of the economy and the stress it continues to level upon major corporations around the globe, few public company CEOs these days would venture a joke about their own golf game during a shareholders’ press conference. And yet, that’s exactly what McDonald’s CEO Jim Skinner did at McDonald’s annual shareholders’ conference on May 27 at the company’s suburban Chicago headquarters.

Answering a question about his own future with the Golden Arches, Skinner said improving his handicap on the links stood high on the list.

“That’s the goal—at least in the short term,” he teased, foregoing any discussion of a succession plan or his personal objectives.

Forgive Skinner or his McDonald’s colleagues if their upbeat, positive nature, characterized by a few jokes and plenty of smiles, seems out of place in today’s corporate arena. Truth is McDonald’s had a robust 2008 and remains optimistic that 2009 will be just as bountiful, even as the winds of financial turmoil continue to swirl.

“2008 was a banner year for McDonald’s. When you set our performance within the context of our current economic environment and its impact on consumers worldwide, the results achieved are even more impressive,” Skinner told a banquet room filled with shareholders, an overflow crowd sitting in a ballroom at the corporation’s Oak Brook, IL campus, and a webcast audience. “Our momentum is continuing in 2009.”

In a year when the Dow dropped 34 percent and the S&P fell nearly 39 percent, McDonald’s was one of only two companies in the Dow Jones Industrial Average to post a 2008 gain. McDonald’s 5.57 percent improvement was only bested by Wal-Mart’s 17.95 percent jump, a significant sign that McDonald’s sits on solid ground with both shareholders and consumers.

“[We’re] better in a robust economy, but we’ve demonstrated that we can succeed during these tough economic times, too,” Skinner said.

McDonald’s reached new heights in 2008, including record-high revenues of $23.5 billion. Systemwide sales grew 11 percent and annual global comparable sales increased 6.9 percent, continuing a string of 68 consecutive months of growth through December 2008. In its 32,000 stores based in over 100 countries, McDonald’s served 58 million customers in 2008, a jump of two million over 2007 and a 25 percent increase over the last five years. Skinner credits the increases to the brand’s value and convenience, staples of the McDonald’s name.

“When you look at previous recessionary environments, you see that convenience and everyday affordability come out on top,” he said. “Customers can get to McDonald’s and get value across the menu. The focus on our restaurants and our customers has helped us throughout the last 54 years and particularly in this environment.”

Yet, this annual meeting of shareholders wasn’t aimed at celebrating past success alone; rather, many wished to know what McDonald’s would do to continue its positive record and what attributes would help it ward off the economy’s continued threat.

Company leadership shared nothing but optimism regarding 2009’s prospects, bolstered in large part by favorable first quarter returns, which included the company’s 24th consecutive quarter of comparable sales growth. Also in the first quarter, McDonald’s grew market share in every major country, a sign that the company’s global efforts have been well planned, executed, and accepted by patrons around the world.

While assuring that the company continues operating from a position of strength, Skinner outlined the principal ways in which McDonald’s would maintain its favorable position.

With a diverse menu mix of classic favorites, new tastes, local flavors, and the early success of McCafé establishing the restaurant as a beverage destination, Skinner said McDonald’s has positioned itself to appease any appetite at any time. With smoothies and frappes readying for a 2010 introduction and a focus on appealing to local tastes, particularly in Europe and Asia, McDonald’s will provide additional reasons to spark consumer visits.

“We’re focused on taste and quality because we know we can deliver on value and convenience,” McDonald’s U.S.A. President Donald Thompson said.

Aided by a supply chain that affords McDonald’s a competitive edge by leveraging size and scale to achieve cost savings, value will continue to guide the McDonald’s philosophy, assured Skinner. Expanded convenience, including 24-hour operations, delivery, drive-thru service, and cashless transactions, would also advance McDonald’s aims and help it secure future success.

“[We are] delivering the great taste of McDonald’s when, where, and how our customers want it,” Skinner said, noting that the company remains steadfast in its plans to build 1,000 new restaurants in 2009.

Another McDonald’s strength stands in its ongoing commitment to improving the customer experience. While fresh food in a comfortable environment will remain central objectives, McDonald’s plans to re-image approximately 2,000 restaurants in 2009.

2008 was a banner year for McDonald’s. When you set our performance within the context of our current economic environment and its impact on consumers worldwide, the results achieved are even more impressive.”

“We understand that our greatest opportunity for growth is dependent upon the drive thru and front counter experience, so that’s where we’ve focused a lot of our time and research,” Skinner said.

Long a strength of the McDonald’s brand, Skinner noted both the traditional and new wave vehicles the company will use to reach customers. While McDonald’s has long been a player on television, the company used Twitter updates to launch McCafé and watched its Filet-of-Fish commercial emerge a viral sensation.

From menu variety, value, and convenience to the restaurant experience and brand marketing, Skinner believes McDonald’s achieves a significant competitive advantage.

“Individually, each of these strategies are advantages; collectively, they provide an unrivaled competitive position for McDonald’s,” he said. “We have all the elements in place to ensure that our strategies connect with our customers.”

The company’s leadership team also took shareholder questions on issues as far ranging as a zero tolerance policy for slavery in the supply chain to poultry slaughter, the 2016 Olympics, and the disappearance of the Asian salad from the menu. And while the economy took center stage at various points, Skinner silenced any apprehension. Sporting optimism and confidence, a track record of success, and proven methods, the veteran CEO said McDonald’s had no plans to slow.

“It’s still full speed ahead for us,” he said.

Daniel Smith is a frequent contributor to QSR.