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McDonald’s Is Making Up for Lost Time as Chicken Sandwiches Boost Sales | The Motley Fool

There was probably no bigger critic of McDonald’s (NYSE:MCD) missing the boat on the chicken sandwich craze than its own franchisees, but after the fast food giant’s second-quarter earnings report they have to feel like they’re ruling the roost.

McDonald’s reported sales and profits that beat Wall Street expectations, based in large part on the success of the three chicken sandwiches it launched in February. The company enjoyed double-digit comparable sales growth in the U.S., not just against pandemic-depressed numbers, but on a two-year stack as well.

The fast food chain may have been late to join the chicken sandwich wars, but it’s quickly making up for lost time.

Image source: Getty Images.

Playing catch up

When McDonald’s finally entered the fray, there was good reason to think its impact would be negligible. Popeyes Louisiana Kitchen had a good 18-month head start on its rival, and other fast food and fast casual chains were following suit to join on what was becoming a cultural phenomenon. Even chicken king Chick-fil-A jazzed up its chicken sandwich to ensure it was remaining relevant.

Yet McDonald’s plodded along, seemingly ignoring the hubbub going on around it but taking withering fire from its franchisees who began acting to develop a sandwich of their own. They could see they were losing customers and needed something on their menu to generate some buzz.

That’s why the launch of the corporate-backed initiative to release three chicken sandwiches had all the earmarks of being too little, too late. Yet it turned out to be exactly what McDonald’s customers were looking for.

Birds of a feather

Mobile-device location data from analytics company Placer.ai indicated consumers were flocking to McDonald’s right out of the gate. It noted foot traffic to McDonald’s restaurants surged 19% on the day the sandwiches hit the menu compared to the year before, and saw increases over the following days and remained elevated thereafter.

It should be remembered that these increases were being measured against foot traffic from before the pandemic forced the eventual closure of restaurant dining rooms. And the increases were even well above 2019 levels.

Placer.ai’s VP of marketing Ethan Chernofsky said, “The launch was so significant that it fundamentally changed the trajectory for McDonald’s.” 

While that helped boost first-quarter results at the time, it’s clear the second quarter is benefiting too. McDonald’s comps were up 26% from last year, but 15% higher from two years ago.

Betting on partnerships

McDonald’s actually hit marketing magic this past quarter. In addition to its chicken sandwiches resonating with consumers, it also had a big hit with a chicken nugget promotion featuring BTS, the South Korean K-pop (or Korean pop music) boy band.

It also enjoyed a big recovery globally, with a 2.6% rise in comps in international markets. The gains were much more muted than in the U.S. because many foreign markets continue to face severe COVID-19 restrictions.

Yet McDonald’s isn’t resting on its successes. It’s building on its partnerships with BTS, Travis Scott, and J Balvin by announcing its newest celebrity pairing, this time with rapper Saweetie. It will introduce the “Saweetie Meal” featuring a Big Mac, chicken nuggets, fries, drink, and sauces, including the “Saweetie and Sour Sauce.”

McDonald’s might not be ruffling the feathers of leaders Popeyes and Chick-fil-A just yet, as both chains are seeing foot traffic improvements of their own, according to Placer.ai. But it at least now has a dog in the hunt. With the recent release of Popeyes sister chain Burger King’s own chicken sandwich, the Ch’King, the Restaurant Brands International (NYSE: QSR) sibling rivalry could benefit McDonald’s.

Now it’s cooking

Until it introduced the new chicken sandwiches, gains in McDonald’s stock were rarer than hen’s teeth. Since March, though, its shares have gained about 20% and the restaurant stock is looking the best it’s been in quite some time. 

Focusing on its core menu, giving its customers and franchisees food they want, and making smart partnerships put McDonald’s back on top.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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