McDonald's is set to report third-quarter earnings before the bell on Wednesday, and the expectations are sobering. Analysts surveyed by LSEG and StreetAccount estimates point to U.S. same-store sales declining 0.5%. For a company of its scale, that is not a rounding error. It is a signal that the core business at home is still struggling to convince customers to come back.
CEO Chris Kempczinski has already admitted the problem. Last quarter, he said the chain's U.S. business fell short, hurt by uneven execution of its value offers and complicated launches of new menu items. Those are operational failures, not macroeconomic ones, and they are within management's control. The company's response was to name Skye Anderson as its new U.S. president. A leadership change is a reasonable step, but it is not a strategy by itself.
Investors have noticed. Shares have fallen about 11% over the last year, weighed down by concerns about the U.S. business, expensive plans to upgrade restaurants and the broader economy. With a market capitalization of roughly $186 billion, McDonald's still has the resources to fix its execution. The open question is whether it will simplify its menu, make its value promotions easier to understand and deliver them consistently, and prove that the restaurant upgrades will pay off rather than simply add cost.
Executive commentary on the fourth quarter will matter as much as the numbers themselves. Chipotle Mexican Grill executives said last Wednesday that the restaurant industry saw traffic soften in October. If that softness is industrywide, McDonald's cannot blame its results entirely on its own missteps. Still, a value-focused chain should be better positioned than most when customers are cutting back, and that is precisely why a weak U.S. quarter would be hard to explain.
My advice to McDonald's is direct. Stop launching complicated items that slow kitchens and confuse customers. Pick a small number of value offers, communicate them clearly, and execute them every day. Give the new U.S. president a clear mandate and measurable targets. Wednesday's report will show whether the company is making progress, and investors should judge it on that basis.