McDonald's stock drops after CEO gets fired for acting with employees

Steve Easterbrook, president and CEO of McDonald's Corp., walks in the garden after a morning session under Allen & Co. Media and Technology Conference in Sun Valley, Idaho, USA, Wednesday, July 12, 2017. [19659002] David Paul Morris | Bloomberg | Getty Images

Shares of McDonald's fell on Monday, after the fast-food giant announced it had fired CEO Steve Easterbrook for having a relationship with an employee.

The stock, which has a market capitalization of $ 1[ads1]49 billion, opened 1.9% Monday. It had slipped as much as 3.1% in the premarket. Shares of rival Wendy & # 39; s, valued at $ 4.8 billion, increased by 2.2%.

After taking the helm of McDonald's in 2015, Easterbrook led a turnaround of the company, bringing the value of the stock to nearly double. His successor Chris Kempczinski, in his previous role as head of McDonald's US business, worked closely with Easterbrook in working to turn American restaurants.

"Given Kempczinski's role as president of McDonald's, he was the obvious eventual successor to Easterbrook, but the timing is clearly much faster than expected," Bernstein analyst Sara Senatore wrote in a note.

Kempczinski stated that the Wall Street Journal on Sunday did not plan for a "radical, strategic shift."

During Easterbrook, McDonald's increasingly turned its attention to technology. U.S. locations have received technology-focused upgrades, such as self-service kiosks and digital menu boards. It is trying to hit $ 4 billion in supply sales by the end of 2019. The company also bought two companies this year that are trying to use artificial intelligence in drive-thrus.

But expensive store renovations, delivery costs, and value deals led to an abusive relationship between McDonald's management and the US franchisees, which formed an independent group a year ago to address the concerns. As a result of McDonald's concessions, the relationship has improved in recent months.

"This balance of relationship with franchisees and shareholders, which may sometimes have different objectives, will be crucial as Mr. Kempczinski begins his new role," Cowen wrote analyst Andrew Charles in a note.

While Kempczinski has no international experience in the global fast food chain, he was president of Kraft International before joining McDonald's.

"We are definitely surprised by the news and see Mr. Easterbrook's departure as a loss, but also believe the company's strategy is on a very solid footing and the McDonald's system is much more than just a man," BTIG wrote analyst Peter Saleh in a note.

Joe Erlinger, who will take over as President of McDonald's USA, is currently President of his internationally operated markets, which include countries such as Australia and the United Kingdom. Prior to assuming the role in January, he was president of high-growth markets.

Piper Jaffray analyst Nicole Miller Regan downgraded McDonald's shares after the announcement.

"Our experience leads us to take a more cautious view of the potential lack of momentum and time involved in formalizing a new team," she said.

McDonald's last month had its first quarterly earnings shortfall in two years after campaigns struggled to lure US customers away from the competition.

Easterbrook's shooting follows two other recent leadership departures. McDonald's global marketing manager Silvia Lagnado and communications manager Robert Gibbs left last month.

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