When a company has as dominant of a global presence as McDonald’s Corp. (ticker: MCD) has, finding new ways to increase market share can be difficult. However, a new report by BTIG analyst Peter Saleh says McDonald’s may soon be able to focus on regaining lost business.
McDonald’s recently announced plans to roll out a new mobile ordering system at 14,000 locations by the end of 2017. In addition to the mobile push, McDonald’s will be adding in-restaurant ordering kiosks at 2,500 restaurants by year’s end as part of its “Experience of the Future” initiative.
McDonald’s has denied reports that the kiosks will be replacing 2,500 human cashiers.
“Our CEO, Steve Easterbrook, has said on many occasions that self-order kiosks in McDonald’s restaurants are not a labor replacement,” a McDonald’s spokesperson says. “They provide an opportunity to transition back-of-the-house positions to more customer service roles such as concierges and table service where they are able to truly engage with guests and enhance the dining experience.”
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Regardless of whether the “Experience of the Future” will result in fewer human jobs, Saleh considers the initiative good news for investors. He says the mobile and kiosk ordering push will allow McDonald’s to significantly reduce labor costs.
“Adoption of kiosk ordering should help reduce labor expenses by 200 to 300 [basis points], savings that can be reinvested into a stronger value offering to help recapture some of the concept’s lost traffic,” Saleh says in a note issued Thursday.
Based on the results of previous mobile ordering initiatives at Domino’s Pizza ( DPZ) and Panera Bread Co. ( PNRA), BTIG estimates McDonald’s may be able to boost same-restaurant sales by 5 to 6 percent.
Saleh says the initiative could impact sales as soon as 2018. BTIG has raised its 2018 earnings per share estimate for McDonald’s from $6.79 to $7.01.
Cowen analyst Andrew Charles also says the initiative “should bear fruit in 2018 with a combined 130 bps contribution to U.S. [comparable sales].”
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BTIG has a “buy” rating and $175 price target for McDonald’s stock.
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McDonald’s ‘Experience’ Could Boost Sales originally appeared on usnews.com
