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McDonald's new chicken sandwiches lose some hype — here's what it means for the company's stock

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Yahoo Finance’s Brian Sozzi and Myles Udland discuss how the chicken sandwich wars are impacting McDonald’s stock.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. It's been a couple of years now. The chicken wars have been raging. Brian Sozzi, McDonald's getting in on the mix just within the last quarter with a chicken product. A presentation, the way they put it in the bag, the bag the chicken comes in looks suspiciously like a certain rival that rhymes with McFil-A. What's happening with this product inside of McDonald's locations? And what's it doing, or not doing, really, for the company's top line here?

BRIAN SOZZI: Well, McDonald's report earnings on April 29. And all indications are, at least, according to Jefferies analyst Andy Barish, the quarter for McDonald's will be pretty good. He's estimating 10% same store sales increase, in large part because they released three new crispy chicken sandwiches in mid-February. And he looked at some of the Google search data.

And you could see that Google search data for the chicken sandwich rose significantly around its mid-February launch. Foot traffic also rose significantly. And you can see some of that on the screen right now, the Google searches for that sandwich around its launch, if ever you could see those spikes there in that chart. So, it's shaping up to be a good quarter for McDonald's, at least according to Barish.

I do find it interesting, though, that, Myles, we're not seeing estimates rise across the board for McDonald's first quarter. And I think that does reflect what you're seeing on the other side of that chart. Interest in these crispy chicken sandwiches by McDonald's waned after the initial interest, likely as McDonald's probably pulled back on some promotions. People could trot them out. They're like, eh, you know what? I'm sticking to Popeye's. Forget this McDonald's chicken sandwich. I'm going back to Popeye's.

But nonetheless, the Street, at least Jefferies analysts, looking a little optimistic for the first quarter, but maybe not for the balance of the year. Again, it comes down to the fact, can McDonald's continue to innovate? Can they make more interesting sandwiches? That's not McDonald's MO. That's what Popeye's does. But at least, McDonald's here is set up to potentially see some strong sales in the first quarter. Chicken sandwiches, stimulus, easy comparisons.

MYLES UDLAND: Well, you know, Sozz, they got-- they have the easy comps, but McDonald's is in that basket of brands that never really had a mass kind of shutdown to hurt sales that was outside of our normal behaviors being altered, right? I mean, most McDonald's locations were probably open within a couple of weeks of-- I guess, now we're lapping the exact time of year that it would have been-- the very beginning of some reopenings. And McDonald's was able to operate through most of that.

But if you look at the brand's trajectory-- and it's now coming up on an almost a 10-year turnaround here-- is innovation the growth driver for McDonald's? Or I mean, all day breakfast was really the last kind of innovation that we've seen that had new kind of kitchen outfittings and all that stuff. I mean, what is the driver for McDonald's? Is it just kind of playing fundamental baseball, if that's what it is, right? Like, keeping things simple, don't make any major errors, let Popeyes do Popeye's stuff, and just kind of continue to bang out Big Macs and $1 coffees.

BRIAN SOZZI: Yeah, well, it's not selling low fat foods McDonald's. That's not going to be the earnings driver any time soon. I think the main driver for McDonald's, Myles, this year is cutting costs. They've been very mindful and cutting costs, getting out of a lot of contracts working with franchisees who are just not getting the job done. Innovation, you don't think McDonald's. You think Chipotle. You think Starbucks. You think a Dunkin' Brands. McDonald's is not even in this conversation.

I know they're very proud that they had three new chicken sandwiches they launched in February. But they were about a year and a half late. Why weren't they more involved in this space two years ago when you had Popeye's really knocking homeruns here with their yummy chicken sandwich? And of course, as our producer Val knows, she mentioned the Chick-Fil-A sandwich, which is very, very popular still to this very day.

MYLES UDLAND: Yeah, but I mean, look, when I go to McDonald's, I know what I want, right? I want a medium number one with the coke. That's it. I don't need to look at the rest of the menu. I don't even need to see a menu. I think we all basically know what's happening.

BRIAN SOZZI: Myles, your WHOOP Strap lets you eat McDonald's?

MYLES UDLAND: My WHOOP Strap does not let me eat McDonald's. Fortunately now, instead of the McDonald's being one block away from me, it's about a 15-minute drive. So I don't really see that getting into the diet as much out here in rural New Jersey as maybe it was back on the Upper East--