McDonald’s Corporation (NYSE: MCD) will be rolling out new “dollar” menus starting in January, and Wall Street is lovin’ it.
On Monday, McDonald’s said it will be adding new value offerings for $1, $2 and $3 in 2018, a move that will likely intensify a national fast food pricing war. McDonald’s is hoping to continue the momentum from its highly successful McPick 2 promotion, in which customers can select two menu items from a list for only $5.
Jefferies analyst Andy Barish says McDonald’s focus on value and technology has it in a strong position heading into 2018. McDonald’s has been installing digital ordering kiosks in 2,500 restaurants nationwide in 2017 as part of its Experience of the Future initiative. In addition, the company has been promoting both mobile ordering and delivery services.
“We find the combination of digital, remodels and delivery (with UberEats) will make a +3 percent U.S. same-store sales result very visible with potential upside depending on how quickly initiatives gain traction,” Barish says in an upgrade note on Tuesday, according to CNBC.
“Additional efforts around national value (to come in early 2018), quality, premiumization (fresh beef in quarter-pounders, Signature Crafted), and beverages could layer additional sales.”
Earlier this year, Stephens analysts estimated that McDonald’s generates roughly 10 percent more sales per kiosk than it does per traditional order. Barish says McDonald’s is also experimenting with technology that will ensure mobile orders are not prepared until customers are within close proximity to the store.
Despite the growth potential that the one-two punch of value and technology could provide for McDonald’s in 2018, investors will be watching margins closely as a fast food pricing war escalates. Yum Brands (YUM) has its own value menu of $1 offerings at its Taco Bell restaurants, and Subway recently introduced a $2.99 six-inch sandwich menu.
McDonald’s decided to drop its original dollar menu in 2013 because of concerns it was eating into company profits.
McDonald’s intends…
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