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Brian Sozzi On McDonald's Turnaround Attempt

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Brian Sozzi of Belus Capital Advisors commented Wednesday on McDonald's Corporation (NYSE: MCD) latest attempt to turn around its sagging sales.

The efforts “include new primetime TV ad spots, multiple menu changes, and the introduction of new technology as it tries to win back consumers craving healthier, or more interesting, food at Chipotle Mexican Grill, Sonic Corporation and Shake Shack. Its initial efforts have yet to show any financial benefits, but the impact of some of its other moves won't be known until later this year,” according to Sozzi.

Sozzi highlighted three areas were the company is “trying to return to the good graces of the increasingly health conscious U.S. consumer -- and its investor base.”

  • “Convincing customers that McDonald's isn't exactly the same place it was when they were kids.”
  • The company has pursued an advertising campaign that “has brought to the surface raw discontent -- in real-time on social media no less-- with the McDonald's brand, perhaps damaging the company's chances at reversing its financial fortunes in 2015.”
  • “Simplifying the menu to speed up lines and encourage local differentiation.”

Eight items will be cut from the menu and number of Extra Value Meals will be reduced from 16 to 11. “By reducing menu complexity,” Sozzi thought that “McDonald's could avoid snafus with its advance ordering rollout and offer more specific rewards to users that will drive traffic.”

“Using new technology to give customers more choices.”

Touchscreen ordering with customized toppings are part of the initiative but Sozzi notes two roadblocks: “a custom burger could take north of five minutes to prepare and set a penny-pinching consumer back $7.”

McDonald's recently traded at $91.47, down 1.47 percent.

Latest Ratings for MCD

DateFirmActionFromTo
Dec 2017JefferiesUpgradesHoldBuy
Oct 2017Credit SuisseMaintainsOutperform
Oct 2017NomuraMaintainsBuy

View More Analyst Ratings for MCD
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Posted-In: Belus Capital Advisors Brian Sozzi Shake Shack SAnalyst Color Intraday Update Analyst Ratings

 

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