McDonald’s is gearing up to introduce a brand-new addition to its US menu next week: the Chicken Big Mac.
With hopes of bringing in more customers and expanding its already impressive chicken offerings, the fast-food giant is betting that this latest twist on its iconic sandwich could help it reverse a challenging year.
The Chicken Big Mac is essentially a variation of the original Big Mac, but with two tempura-battered chicken patties in place of the usual beef.
This sandwich, which has already made waves in international markets, will be available to US customers starting on October 10 as part of a limited-time offer.
Over the past few years, McDonald’s has been doubling down on its chicken business, which has seen significant growth as consumers worldwide continue to show a preference for chicken items.
For example, last year the company rebranded its crispy chicken sandwich as the “McCrispy,” which has already garnered over $1 billion in annual sales.
The fast-food chain is keen to build on this success by rolling out more chicken products, including chicken tenders and wraps in the near future.
McDonald’s existing chicken portfolio — featuring crowd favorites like McNuggets and the McChicken sandwich — now brings in sales figures comparable to its beef offerings, amounting to around $25 billion annually.
The company’s recent earnings call highlighted this achievement, noting that the Chicken Big Mac could bolster McDonald’s position as a leading name in the chicken category.
Tough year for McDonald’s
2024 has been a tough year for McDonald’s. The fast-food giant has experienced a slump in sales, with consumers cutting back on dining out after grappling with years of rising inflation.
The broader fast-food industry has had to adjust to price increases that have outpaced those seen in casual dining restaurants and grocery stores, leading to some customer drop-off.
In an attempt to entice customers back into its stores, McDonald’s rolled out a value meal deal in June, which offered a combination of a McDouble or McChicken sandwich, small fries, four-piece chicken nuggets, and a small soft drink for $5 or $6, depending on the location.
The promotion was originally set to last for just one month but was extended through December due to positive customer response.
According to data from retail location analytics firm Placer.ai, McDonald’s has seen a modest improvement in foot traffic in recent months, thanks in part to the value meal promotion.
McDonald’s franchisees also voted to continue offering the $5 meal deal in most US markets, extending its availability into the holiday season.
Investors are paying attention
Despite the mixed sales performance, investors are still optimistic. Since hitting a recent low in July, McDonald’s stock has surged 23%, reaching an all-time high of $304.51 at the end of September.
Many on Wall Street view McDonald’s as a company that can weather economic turbulence, with its extensive scale and strong financial foundation giving it an edge over smaller competitors.
Some analysts have raised concerns about the potential downside of value deals like the $5 meal. While such promotions can successfully drive sales, they also have the potential to impact margins at franchised locations.
However, McDonald’s business model, which derives revenue from franchise royalties based on total sales, should shield the company itself from major negative effects.
McDonald’s has the scale to win
With the upcoming release of the Chicken Big Mac, McDonald’s is likely increasing its marketing and advertising spend, which could also have a short-term impact on its earnings.
However, given its global reach and financial stability, the company is well-positioned to handle these costs.
Industry experts suggest that McDonald’s could emerge as a winner in the ongoing “value wars” among fast-food chains.
In a recent note, Goldman Sachs analyst Christine Cho highlighted the company’s scale as a key factor in its ability to outperform peers.
She raised her 12-month price target for McDonald’s stock from $284 to $325, signaling strong confidence in the company’s future growth potential.
Earnings in focus
McDonald’s is scheduled to report its third-quarter results on October 29.
Wall Street analysts surveyed by FactSet expect the company to report earnings of $3.19 per share, in line with last year’s results. Revenue is forecast to increase slightly by 1.5% to $6.69 billion.
All eyes are now on the Chicken Big Mac launch, as McDonald’s continues to innovate within its menu offerings in a bid to drive growth in an increasingly competitive fast-food industry.
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