Yahoo Finance McDonald’s to slim down in U.S.
McDonald’s (MCD) is trimming some fat, at least when it comes to its underperforming locations.
For the first time in over 40 years, the fast-food chain will close more stores than it opens in the U.S., according to the Associated Press.
These closings come as the company implements CEO Steve Easterbrook’s turnaround plan, a strategy announced in May to revive sluggish growth after years of declining U.S. sales. A mix of franchised and company-owned locations will be affected, a McDonald's spokeswoman told the Associated Press.
Yahoo Columnist Rick Newman thinks the closings are a step in the right direction.
“There's nothing that says every retail outlet you open shall stay open in perpetuity," he says. "If they do this right, they will close underperforming stores and concentrate their efforts on the best performers. There’s a constant rebalancing, and McDonald's has been doing that for some time.”
Even so, the reduction is symbolic of larger issues at the company, adds Newman, who thinks McDonald's is close to its saturation point in the U.S.
"How much bigger can they get in the United States, where they're practically everywhere?" he says. "A lot of McDonald's growth has been coming from overseas anyway."
McDonald's currently plans to add 300 restaurants to its more than 36,000 international locations.
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Other chains have contracted their footprints in efforts to boost profitability. Starbucks (SBUX) closed hundreds of stores in 2008. Since then, the coffee giant has seen strong sales growth and increased profits. Recently, Gap (GPS) announced that it is closing a quarter of its stores as part of the chain's attempt to bolster profits.
"Big U.S. companies don't just grow indefinitely, and there does come a point of reckoning," says Newman. "IBM (IBM) has been through this. General Motors (GM) used to have eight brands...There comes a point when bigger is not better."
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