Is the McDonald’s Menu Short On Innovation?


Hedgeye Risk Management rebuts claims offered by Wall Street analysts that McDonald’s (NYSE:MCD) needs a “hero-like lifting” from U.S. consumers, arguing that their expectations for reflation are stretched. It instead predicts that the fundamentals of McDonald’s business will simply lead it to lower its 2013 earnings per share estimate.

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Though McDonald’s hasn’t introduced any striking new menu items, it has employed a different strategy of innovating a part of its menu that has boasted stability and a loyal fan following. McDonald’s innovation team believes that adding to its previously untouched Quarter Pounder line-up will bring the company much success.

However, if the new Quarter Pounders’ performance mirrors that of their predecessor, the Angus burger, McDonald’s investors will have a reason to worry, according to Hedgeye. Reasons for the the failure of the Angus burger could’ve ranged from its cost to its construct. Unfortunately, while McDonald’s menu lacks strikingly new innovation, Burger King’s (NYSE:BKW) summer menu promises the opposite, even offering a new-ticket item that is strikingly similar to McDonald’s famous McRib.

Conclusive evidence of the two food chains’ summer successes won’t be available until later in the season.

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