Value meals are a 'positive shift' for McDonald's to attract customers, says Jefferies' Andy Barish

Hype McDonald's is finally serving as limited time $5 value meal starting today in stores across the US. It comes as fast food rivals Wendy's and Burger King both launched $5 value meals of their own looking to attract value conscious consumers. Joining us now is Andy Barish, Jefferies equity analyst. Andy, great to have you with us. Good morning. Thanks for having me. Are they going to, are they going to gain customers from this first? I mean, is it only going to last as long as the promotions are on? No, we really believe this is a positive shift for McDonald's to get back to a sharper price point and obviously back it with the national muscle and marketing advertising that the brand possesses in a bigger way than anybody else out there. So, yeah, we do believe this will stem the tide of what's been a difficult traffic environment recently from McDonald's and start to get things going again in the second-half. And it's probably just the first salvo. Melissa, do you think that McDonald's waited too long? I mean, it got it got to the point where the McDonald's USA president had to issue a rare open letter addressing the perception that McDonald's hiked their prices faster than inflation. I mean, once you get to that point and you're sort of the the poster child of high prices on social media, that's a tough spot to be in for McDonald's. Yeah, or misperception to some extent. But yes, there's been a lot of pricing from McDonald's in the category and others outside of fast food have even advertised against that. But remember, McDonald's as a brand historically has been the everyday value leader. I think they still maintain that leadership position. It's just that the gap to the competitors have narrowed as McDonald's probably did rely a little too long and too much on deals through the app and the rewards program, which has been very, very positive for them, but not as impactful and influential as what national television advertising will do With a, with a $5 price point in our, in our perspective, we mentioned at the top and then our introduction to you, Andy, the other fast food chains, QSRS that are offering these sort of important $5 price points for consumers. Who do you think gains the most that I've also, we can also toss in there if you cover them, Starbucks, which is offering a $5 pairings menu and also an occasional 50% off your second drink. I mean that those are deep discounts there. Yeah, historically. And again, we think this time around we've, you know, we've done some consumer survey work recently. The lower end does continue to struggle, but will be prompted by price and promotions. So we think McDonald's will probably put a little bit of a herd on some of the other national QSR players that were mentioned earlier, maybe a Wendy's or a Burger King. Taco Bell as part of Yum also happens to score very strongly on value and I think we'll, we'll have a good second-half as well. In terms of Starbucks, yeah, they're, they're struggling and we're, we're cautious on that stock at this point. They're clearly dealing and trying to find some answers to some of their challenges in the US. But, you know, I think there's still a lot of work to be done to increase frequency and, and drive traffic, you know, which was down mid single digits in in, in the most recent quarter for Starbucks. Andy, thank you, Andy Bearish.