Shares in fast-food chain McDonald’s (MCD) were tastier today as the iconic group slashed its prices.
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According to an article in the Wall Street Journal, McDonald’s has responded to concerns over rising inflation, affordability and draining consumer confidence. Indeed, it is reported that Big Mac meals have shot up to $18 in some of its locations.
Combo Crash
As a result, the chain is lowering the cost of its combo meals. Following discussions with its U.S. franchisees, the cost of eight popular combo meals will be kept 15% below the sum of the individual items’ prices.
The chain will also reportedly run $5 breakfast and $8 Big Mac and McNugget combo-meal specials later this year, marketing them as Extra Value Meals. McDonald’s will, it is understood, offer financial support to franchisees if they drop their prices.
The move is part of the company’s plans to beef up its reputation for value. McDonald’s has said that its new McValue deal menu is helping, but many customers still feel the chain’s menu prices are just too high.
The McValue platform includes Buy One, Add One for $1 offers and $5 Meal Deals. App users can also get free medium fries and a chicken sandwich.
Value Success
McDonald’s value strategy is already paying off after it posted strong Q2 earnings, which beat Wall Street expectations.
Comparable store sales worldwide rose by 3.8% year-over-year, which topped the 2.6% forecast from Visible Alpha. More specifically, U.S. comparable sales climbed 2.5%, slightly above estimates, while international markets delivered strong growth, helping the firm offset weaker U.S. traffic and maintain overall revenue momentum.
CEO Chris Kempczinski explained that while promotions like the $2.99 Snack Wrap and $5 meal deals boosted sales last quarter, these are only the first steps. The company’s main goal is to make its “core menu” more affordable to attract low-income consumers who have cut back on visits due to higher prices.
Is MCD a Good Stock to Buy Now?
On TipRanks, MCD has a Moderate Buy consensus based on 14 Buy, 13 Hold and 1 Sell ratings. Its highest price target is $552. MCD stock’s consensus price target is $337.79, implying a 7.27% upside.
