McDonald’s New Chief Must Get Europe Cooking

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The New York Sun

McDonald’s Corporation’s chief executive officer, James Skinner, named Monday to replace Charles Bell as he battles cancer, takes over the world’s largest restaurant chain as it pushes to revive sales in Europe.


Mr. Skinner, 60, is the third chief executive for McDonald’s in about seven months.Mr.Bell,44,was diagnosed with colorectal cancer in May, a month after becoming CEO following the death of James Cantalupo.


Mr. Skinner, who rose from management trainee in 1971 to a chief operating officer post overseeing more than 30,000 locations worldwide, will try to boost sales in Europe with an expanded menu including meal-sized salads. His experience, like Mr. Bell’s, is steeped in details of restaurant operations and customer service, the Oak Brook, Ill.-based company said in a statement Monday.


“Europe is where they need the turnaround now,” said Janna Sampson, who helps manage $1.1 billion, including about 1.8 million McDonald’s shares, at Oakbrook Investments LLC in Lisle, Ill. “He needs to reassure employees that they will stay the course.”


Mike Roberts, 53, chief executive of McDonald’s USA, was named president and chief operating officer yesterday.


Shares of McDonald’s rose 46 cents to $29.84 at 1:42 p.m. in New York Stock Exchange composite trading. The shares rose 9.8 percent during Bell’s tenure as chief executive.


The company’s net income rose 42% to $778.4 million in the third quarter, Mr. Bell’s only complete quarter in charge.


Sales jumped 9.3% after the company attracted new American customers with improved service, longer hours and higher-priced premium salads, and Chicken Selects white meat strips.


McDonald’s debuted larger salads in 2003 after pulling an earlier product, Shaker Salads, because consumers didn’t like adding dressing and shaking it in a cup, Mr. Skinner said in an October interview at McDonald’s headquarters. The new salads are bigger and come with Paul Newman dressings and meats such as chicken and bacon.


“Customers have given us permission to expand the menu and give them different variety and choice because we are doing a better job with the basics,” Mr. Skinner said. “When you deliver on the basics, our customers say, ‘Okay, we are willing to give something new a try.'”


Mr. Skinner is well known to McDonald’s employees and franchisees and could prove to be “a source of stability,” wrote New York-based UBS Securities analyst David Palmer, who rates Mc-Donald’s as a “buy.”


“Current initiatives should have enough momentum to be self- supporting in the near-term,” Mr. Palmer wrote. “Over the long term, we remain cautiously optimistic as key management continue to execute on the company’s vision.”


Of the 18 analysts tracked by Bloomberg,10 rate McDonald’s shares a “buy” and eight say “hold.”


Mr. Bell, an Australian, began his career at McDonald’s flipping burgers at age 15. He decided to pursue a career at McDonald’s after studying television and film at North Sydney Technical College without graduating. He met his future wife at the company, where she was a fellow employee, and was named to the board in Australia at age 29.


Mr. Bell had surgery after being diagnosed with cancer and underwent a second operation in August to clear a blockage caused by scar tissue from the earlier procedure. He told employees September 28 he was spending additional time in the hospital dealing with complications from the surgery and continuing chemotherapy. He was in “constant contact” with senior management, he said at the time.


He resigned Monday so he could “devote all of his time and energy to his courageous battle against cancer,” the company said. “Charlie is a remarkable leader and well loved by the McDonald’s family, and we fully understand and respect his decision.”


A spokesman, Walt Riker, declined to comment on Mr. Bell’s health or say whether he had returned to the hospital. Mr. Bell will remain a McDonald’s director.


Sales in Europe, McDonald’s second-biggest market after America, increased for the first time in three months in October, rising 2%, while sales in the region encompassing Asia, the Pacific, the Middle East, and Africa rose 6.1%, the 12th straight monthly gain.


McDonald’s needs to improve advertising, pricing, and execution in Europe, Mr. Skinner said in the interview. In recent months, Mr. Bell extended hours in Britain and France and added television advertising for the chain’s cheapest menu in Germany, where unemployment has climbed for nine months.


“Our business in Germany has always moved closely with the economy and discretionary income,” Mr. Skinner said. “One of the most important things is for us to have an everyday value offering that works with our customers.”


Mr. Skinner, in charge of McDonald’s almost 4,000 restaurants in Japan since the beginning of 2004, oversaw new marketing and menu items that boosted sales, Mr. Riker said. In the region including Asia, the Pacific, the Middle East, and Africa, sales at stores opened at least 13 months climbed 6.5% in the first nine months of the year.


Naming Mr. Skinner chief executive was “smart because they want someone who knows the organization,” Oakbrook Investments’s Mr. Sampson said. “He’s the kind of person who can settle employees down and get them focused. Skinner can carry on what Bell was doing and what Jim Cantalupo started.”


As vice chairman Mr. Skinner in July had his responsibilities expanded to include oversight of operations in Asia, the Middle East, Africa, and Latin America.


Before being named vice chairman in December 2002, Mr. Skinner was president and chief operating officer of the McDonald’s Restaurant Group, overseeing the chain’s global operation. Prior to that, he was McDonald’s European president from 1997 to 2001.


Mr. Skinner’s compensation last year as vice chairman was $2.67 million including salary of $830,189 and bonus of $810,000, according to a U.S. Securities and Exchange Commission filing. He received $880,609 in restricted stock awards and $148,840 in other compensation including profit sharing and insurance premiums.


“Luckily, McDonald’s has a pretty deep bench,” Mr. Sampson said. “It is serving McDonald’s well.”


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