McDonald’s Sticks to Burgers After Innovation Corroded Its Sales
McDonald’s (NYSE:MCD) knows it has a lot of ground to cover, but that’s why the chain is going back to basics and focusing on what it knows. Chief Financial Officer Pete Bensen explained the chain’s latest strategy at a Bank of America Merrill Lynch conference in New York on Tuesday, and his assertion that McDonald’s is now refocusing on its core business and promoting its breakfast menu led the company’s shares to rise more than 3 percent that day. As of 11:30 a.m. Eastern Wednesday, the stock sat down 0.19 percent at $98.59.
McDonald’s has suffered quarter after quarter of disappointing U.S. sales losses, and many analysts attribute those difficulties to the chain overcomplicating its menu and rolling out items that the fast-food giant isn’t known for. Fish McBites, McWraps, Mighty Wings? That’s doesn’t sound like the Big Mac-focused McDonald’s that customers have known and loved, and that’s why some believe the chain suffered a 0.2 percent drop in U.S. same-store sales this year.
Now, McDonald’s is preparing to roll out its latest menu item, but this time, it’s an offering that the company has a knack for: burgers. Starting this week, the Bacon Clubhouse will be available in beef or chicken, and Bloomberg reports that it is the first burger besides the Big Mac to be topped with special sauce. It is also served on an “artisan roll.”
At the Bank of America Merrill Lynch conference on Tuesday, Bloomberg reports that Bensen said, “We acknowledged last year that we probably did things a little bit too quickly in terms of the Egg White Delight and then the McWraps and then the Quarter Pounders with the various toppings, and that was a stress to the restaurants.” The CFO then explained that McDonald’s now has plans to “refocus on the core” and also look more closely at its breakfast menu. Although Bensen didn’t mention it on Tuesday, there have been reports that the company is considering extending its breakfast hours to better cater to consumers’ late wake-up times.
These new forecasts made investors feel better about McDonald’s business earlier in the week. Although the chain has never promised any expertise in chicken wings or protein-packed breakfast sandwiches, its shareholders know that at its core, McDonald’s is a strong business thanks to its burgers, and a new Bacon Clubhouse could at least turn some of its struggling U.S. sales around.
And it’s not just the United States that McDonald’s has a close watch on. Germany and Japan are also two big markets for the chain with performance has not been as good as expected. Bensen acknowledged this on Tuesday, telling his audience, according to the Chicago Tribune, that in Germany, the company is now selling some items at a mid-tier price to close the gap between the brand’s lower-priced foods and extra value menu items. Although the CFO said that results in the U.S., Germany, and Japan could be “somewhat volatile” in the near term, he believes that eventually, the company’s adjustments will help the markets look up.