McDonald's Expanding Value Menu

It was revealed on Thursday that McDonald's MCD is aiming to add more value to the value menu by tweaking and expanding the items on it. According to the Chicago Tribune, the fast food giant is aiming to attract customers to the value menu during this tough economic climate by freshening up what is on offer. MCD will remove small drinks and small French fries from the menu, and replace them with cookies and ice cream cones. That's not all though. On March 26, McDonald's will be introducing the “Extra Value Menu”, featuring items like 20-piece chicken McNuggets, double cheeseburgers, chicken snack wraps, medium iced coffees, and snack-sized McFlurries, plus up to four regional options that had previously been listed elsewhere on the menu. MCD's chief marketing officer Neil Golden said to Reuters that, “The choices have been available for quite some time, we're just making it easier for customers to find them and enjoy them.” Golden added that the prices on those items will remain unchanged – all Extra Value Menu items will be above $1 and many below $2. Many, but not all. In other words, the items are the same, the prices are the same, they are just being rebranded as Extra Value. The Big Mac is being promoted to the Extra Value Menu, while MCD is also attempting to big-up fruit and healthier items in its children's happy Meals, due to recent criticism aimed at the company for its use of toys when marketing fast food to children. On Tuesday, Piper Jaffray released a research report saying that it remains buyers of MCD shares upon conclusion of its proprietary February traffic analysis whereby it is increasing its U.S. same-store sales estimate for February to +8.0% (vs. +7.0% prior). “Following these changes, our U.S. comp estimate for 1Q12 moves to +7.6% (vs. +7.3% prior). Despite McDonald's stock price at near all-time highs and potential pressure from higher YoY gas prices we remain encouraged that the company's ongoing efforts to drive comp across day parts vs. prior periods will help deliver continued same-store sales strength.” Deutsche Bank said that it expects to see some "noise" in both directions in the month, with Leap Day providing a signficant benefit to headline sales, partly offset by difficult weather in Europe. Excl. these factors, our underlying SSS assumptions look somewhat conservative relative to recent trends, as we assume some "reversion to the mean" in core comps.” “We expect MCD to post another solid underlying result driven by the combination of new products (McBites), remodels, and higher menu pricing vs. a yr ago. Our est. implies a significant slowdown in the underlying global 2-yr trend (ex-TD) to +8.5% in Feb from +14.4% in Jan, suggesting our assumptions may be somewhat conservative. Maintain Buy.”