- McDonald’s new $1, $2, $3, Dollar Menu has failed to resonate with customers, according to RBC Capital Markets analysts.
- The analysts are now predicting same-store sales growth of 1% for the first quarter, compared to their previous estimate of 3.5% growth.
- The fast-food chain’s shares fell 4.8%, marking the worst dollar decline in history and the steepest percentage drop since October 2008.
McDonald’s shares were hammered on Friday after analysts slammed its highly hyped value menu as a flop.
The fast-food chain’s shares fell 4.8%, marking the worst dollar decline in history and the steepest percentage drop since October 2008, MarketWatch reports.
The drop came after RBC Capital Markets analysts claimed that McDonald’s new $1, $2, $3 Dollar Menu, which rolled out in January, failed to resonate with customers.
“Our sense is that the $1, $2, $3 platform stole attention from local marketing, particularly at breakfast, which likely slowed as a consequence,” analysts wrote in a note, in which they cut their price target for the company to $170 from $190. “In addition, we believe the menu’s position as a variety play… lacked the ‘hero’ item necessary to resonate with value-conscious consumers.”
“Lastly, we believe McDonald’s early signaling of this initiative may have invited a flurry of competitor responses and diminished its overall impact,” the analysts added.
The RBC analysts are now predicting same-store sales growth of 1% for the first quarter, compared to their previous estimate of 3.5% growth.
McDonald’s revealed plans to roll out the new Dollar Menu menu in late October, which gave its competitors more than two months to come up with a response to the promotion.
The fast-food chain had killed its original Dollar Menu in 2013, and replaced it with a higher-priced value menu. Executives later acknowledged that the move alienated many customers.
The $1, $2, $3 menu offers items including the sausage burrito, McChicken, cheeseburger, and soft drinks of all sizes for $1.
For $2, customers can order the Sausage McGriddle, 2-piece Buttermilk Crispy Tenders, Bacon McDouble, and small McCafé drinks. The Sausage McMuffin with Eggs, new Classic Chicken Sandwich, Triple Cheeseburger, and Happy Meals cost $3.