comscore Lack of appetite for Dollar Menu sinks McDonald’s shares | Honolulu Star-Advertiser
Business Breaking | Top News

Lack of appetite for Dollar Menu sinks McDonald’s shares


    A McDonald’s restaurant in Ridgeland, Miss., on Feb. 14. McDonald’s shares are declining on signs that its value menu may be falling flat with customers.

NEW YORK >> Wall Street is losing its appetite for McDonald’s, believing that there aren’t many fans of its new Dollar Menu.

Shares tumbled 5 percent to a new low for the year today.

Value menus have become the tool of choice at fast food companies to generate traffic. In January, McDonald’s revived its popular Dollar Menu, with items priced at $1, $2 or $3.

But competition for mouths has never been more fierce. Rivals Taco Bell and Wendy’s responded with their own value meals and they’ve won some converts.

David Palmer of RBC Capital Markets lowered his expectations today for the company because of the lack of excitement over the Dollar Menu, on top of a worsening picture for the entire industry.

McDonald’s may have cannibalized its own sales with promotions for the Dollar Menu, pulling customers away from its popular breakfast foods, Palmer wrote. He also thinks the Dollar Menu doesn’t have a “hero” item on it, something that will pull people into a McDonald’s restaurant, rather than a Burger King or Taco Bell.

Palmer lowered his expectations for comparable-store sales by more than two-thirds, to 1 percent. Those sales, from restaurants that have been open for at least a year, are watched closely by industry analyst because they’re a good barometer of the company’s health.

There are reasons that McDonald’s can rebound, Palmers said, for reasons that are both internal and external, including recent, sweeping tax changes that put a little more money into the pockets of consumers.

While Palmer cut McDonald’s Corp. price target to $170 from $190, he remains optimistic that the hamburger chain has time to make changes and reaccelerate same-store sales in the coming quarters. He expects fiscal stimulus from tax reform, improving wage growth, low unemployment and food-at-home inflation to bring more people into McDonald’s restaurants in the remaining quarters.

Shares of McDonald’s Corp., based just outside of Chicago in Oak Brook, Illinois, dropped to $147.60 in afternoon trading, levels not seen since last May.

Comments (9)

By participating in online discussions you acknowledge that you have agreed to the Terms of Service. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. If your comments are inappropriate, you may be banned from posting. Report comments if you believe they do not follow our guidelines.

Having trouble with comments? Learn more here.

Click here to see our full coverage of the coronavirus outbreak. Submit your coronavirus news tip.

Be the first to know
Get web push notifications from Star-Advertiser when the next breaking story happens — it's FREE! You just need a supported web browser.
Subscribe for this feature

Scroll Up