Services

McDonald's Gambles on Bringing Fresh Beef to US Stores

Paul Ausick

Published: March 6, 2018 9:20 am

Last Updated: January 12, 2020 2:44 am

McDonald’s Corp. (NYSE: MCD) announced Tuesday morning that some 3,500 of its U.S. stores are now selling Quarter Pounder and Signature Crafted Recipe burgers made from fresh beef cooked when ordered. The company expects to complete the rollout of the new menu items in most the rest of the United States by early May.

The company said the move, which it announced last year, is “part of a broader commitment to bring customers more craveable and delicious food offerings.”

More plainly said, McDonald’s wants to attract the millennial generation to its stores. Millennials have by and large ignored the Golden Arches in favor of fast-casual restaurants like Chipotle Mexican Grill and Starbucks.

McDonald’s has announced a number of changes over the past year or so that it hopes will attract more traffic and more sales. Revenues fell 11% year over year in the fourth quarter of 2017, largely due to McDonald’s emphasis on its heavily discounted food items and the continued refranchising of company-owned stores.

The danger, of course, is that the company will invest in delivering fresh beef Quarter Pounders and that sales won’t go up. McDonald’s recently introduced a dollar menu for some breakfast items and analysts expressed concern that the change will cut into sales of the company’s already popular breakfast menu.

While the company gets props for trying different things, one has to wonder how many is too many. Recent changes to Happy Meals, a packaging initiative, and using antibiotic-free chicken to make its chicken nuggets. All worthy, but also costly and the costs come right out of shareholder returns. It’s a delicate balance with a lot at stake for McDonald’s and its shareholders.

McDonald’s stock traded up about 0.6% in Tuesday’s premarket session at $151.99 in a 52-week range of $127.34 to $178.70. The 12-month consensus price target on the stock is $187.70.