041183 Mcdonald's Strong Despite New Loss of Chief

Chicago, IL - World fast-food leader McDonald's Corp. was forced into its second major management change in seven months, as chief executive Charlie Bell stepped down to focus on his battle against colon cancer.

Wall Street largely shrugged off events, however, taking comfort in the strong fundamentals of the business.

McDonald's shares closed up about 2.5% at 30.10 dollars, the day after the company announced the Australian executive's sudden departure.

Analysts brushed off the executive shakeup, pointing to the success of the restaurant chain's turnaround and the promotion of two McDonald's veterans.

"Jim Skinner and Mike Roberts are longtime insiders of McDonald's and we do not expect any material change of course in McDonald's direction from the change of management," Paul Westra, an analyst for SG Cowen and Co, said in a note.

Between them, Skinner, who takes over as CEO, and Roberts, who becomes president and chief operating officer, have 60 years' experience with the company, based in Oak Brook, Illinois. They were formerly vice chairman and the head of McDonald's US division, respectively. They will share the two posts formerly held by Bell, 44, who landed the top job following the death of his predecessor, Jim Cantalupo, from a heart attack in April.

Skinner and Roberts take the reins of a company that has turned around its operation in the past 23 months, abandoning its ambitious expansion strategy in late 2003 in favor of one that focused on improving returns from the existing outlets.

Under Cantalupo and then Bell, the company revamped its brand and menu offerings, adding more healthful options, improving customer service and adapting its restaurants to better cater to mothers and the wi-fi generation.

The back-to-basics program has paid dividends, yielding six straight quarters of higher sales and profits. In October, McDonald's reported a 42% surge in third-quarter income as its US sales rebound continued unabated.

US sales growth has been fueled by the addition of popular new menu items including salads, breakfast sandwiches and chicken strips. Extended hours at more than 80% of US restaurants has also helped, along with increased use of electronic payments.

"They pushed the expansion strategy to the point of crisis," said Carl Sibilski, an analyst with Chicago-based Morningstar Inc., who described achievements of the past two years as "impressive."

McDonald's shares have surged three-fold as the company delivered solid earnings and double-digit same-store sales growth, after a decades-long low of 12.12 dollars in March of last year.

There are some weak spots in the operation however. The weak economy in Europe has curtailed the Golden Arches' growth on the continent in spite of similar changes and menu choices.

"International efforts have been mixed so far," Peter Oakes, an analyst with Piper Jaffray, acknowledged in a note, but he said he expected the reforms "to revive the laggard markets."

"We believe that a tremendous opportunity exists to return lapsed customers to McDonald's Europe to try new product introductions that drive higher average checks," said SG Cowen's Westra, pointing to the addition of salads to the McDonald's menu.

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