030136 McDonald's CEO Promises to 'Fix' Company

Chicago - McDonald's new chairman and CEO acknowledged Thursday what he said more and more customers have been telling the company: It needs better-tasting food and faster service.

In his first remarks since taking over the chain on Jan. 1, chief executive Jim Cantalupo said McDonald's will pull back further on expansion and close an unidentified number of struggling restaurants. But he told analysts he remains committed to growth and doesn't see mass closings as a way to pull the world's largest restaurant company out of its worst slump.

Other than committing to stick with its discount menu of $1 items, which has failed to jump-start McDonald's stalled U.S. sales, Cantalupo offered few specifics about a turnaround plan he called "a work in progress."

But he made clear his top priority is addressing customers' rising dissatisfaction with food quality and service -- two areas his predecessor, Jack Greenberg, also tried to improve before retiring under pressure last month.

"Growth is part of our heritage," said Cantalupo, 59, the company's former president and vice chairman who oversaw the proliferation of its international operations. "Right now, though, we are focused on fixing our basic business. I can't even talk about growth until we get some of the basics in our business fixed."

The lack of a detailed plan disappointed Wall Street, even though Cantalupo has been on the job barely two weeks. Shares in McDonald's fell 84 cents, or 5%, to close at $15.85 on the New York Stock Exchange.

The company, battling a saturated restaurant market as well as its own problems, has said it will report its first-ever quarterly loss when fourth-quarter results are issued next Thursday.

Some analysts have urged McDonald's to heavily reduce the number of its more than 30,000 restaurants, including 13,300 in the United States, or dump the "dollar menu."

But while some restaurants will be shuttered -- the majority of them in Japan and the United States -- when results are disclosed next week, Cantalupo and his management team downplayed the move as a strategy shift. "We're not talking about thousands of stores," said chief financial officer Matthew Paul.

Morningstar analyst Carl Sibilski said McDonald's is in the throes of a fiscal "hangover" as it copes with the transition from rapid-expansion company to mature, slow-growth mode.

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