McDonald’s (NYSE:MCD) is looking to expand its bakery offerings by introducing new items such as muffins, banana breads and cheese danish among others. The move is in line with the company’s policy of offering customers a holistic dining experience and creating a menu that is beyond burgers.  While these are considered breakfast items, they will be available all day long.
With an ever expanding menu, McDonald’s now competes against restaurant chains such as Starbucks (NASDAQ:SBUX) and Chipotle Mexican Grill (NYSE:CMG), which are generally categorized as casual restaurants. Casual restaurants are usually more expensive than fast food (or quick service restaurants ). Traditionally, the company has competed against Yum! Brands, Wendy’s, Burger King, among many others. We have a Trefis price estimate of $100 for McDonald’s, which is in line with the market price.
McDonald’s has been putting more emphasis on breakfast items in recent years. In fact, the proportion of outlets that open early is also rising. Currently, 40% of McDonald’s outlets in the U.S. are open 24/7 and 89% of them are open by 5 a.m. Thus, the company is able to attract a greater number of customers at time slots normally considered unusual. Breakfast is an important time slot and contributes almost 25% to McDonald’s revenues. Among recent successes, the company introduced Fruit & Nut oatmeal last year which has been received well.
February Comparable Sales Impress
McDonald’s announced a 7.5% increase in comparable restaurant sales for the month of February. However, the break-up came as surprise as the APEMA (Asia-Pacific, Middle East and Africa) region, which was expected to lead the pack posted a meager growth of 2.4%. European sales grew by 4%, which is fairly impressive performance given the difficulties in European economies.
On the other hand, comparable restaurant sales in the U.S. surged 11.1%, quashing any belief that the world’s largest economy and MCD’s home market offered little growth potential for the company.  Apart from offering value meals, McDonald’s has been gradually expanding its premium offerings such as the Angus Third Pounder, Fruit & Maple oatmeal and introducing new products under its McCafe brand due to which the average spend at a McDonald’s outlet is rising.Notes: