McDonald’s Hopes to Spur Sales With New Mighty Wings

by Alyssa Oursler | August 27, 2013 1:54 pm

McDonald’s (MCD[1]) has introduced a new item to its already extensive menu: chicken wings.

The offering — dubbed “Mighty Wings” — might just be the most substantial new product that’s made headlines in the fast food world lately. Recently, Yum Brands’ (YUM[2]) Taco Bell, for example, introduced a waffle taco while Dunkin Donuts (DNKN[3]) debuted a glazed doughnut breakfast sandwich.

McDonald’s is planning to roll its Mighty Wings on on Sept. 9 and will keep them on the menu for a “limited time.” Other new offerings, including a Pralines and Crème McFlurry, Pumpkin Spice Latte and a Southwest Premium McWrap will also grace the menu around that time.

The bet on Mighty Wings makes sense, but might not be as straightforward as it seems.

USA Today reports[4] that “by some estimates, wings rank among the fastest-growing category for food-on-the-run restaurants.” Sales of wings surged 11% year-over-year in 2012, according to GuestMetrics.

But The Restuarant Finance Monitor noted[5] that “because of their naturally limited supply, coupled with growing demand, few commodities experience the ups and downs of chicken wings.”

That’s likely why McDonald’s is planning on taking just a limited-time dip into the wing market with Mighty Wings. The company generally relies heavily on its ability to squeeze out high margins — boasting a pretty consistent 20% profit margin double that of rivals Burger King Worldwide (BKW[6]) and Yum Brands (YUM[2]) — making such up-and-down input costs a bit out of its comfort zone.

But those high margins do little good when overall sales or sluggish. Which is why MCD is willing to expand beyond its extremely portion-controlled offerings in this instance — it needs to get on a roll again. MCD stock is up 8% this year, just half the S&P 500’s performance for 2013, and the company is coming off a second quarter in which earnings and revenues both fell shy of Wall Street forecasts.

The volatility of wing prices also has led to speculation about what a Mighty Wings roll-out will mean for wing-dependent companies like Buffalo Wild Wings (BWLD[7]). As The Restaurant Finance Monitor put it:

“At this point, McDonald’s sells the wings from its chickens on the market. Given how much chicken the company produces, its decision to take those wings off the market would almost certainly drive up prices again during a year they’re expected to ease.”

Bloomberg agreed[8] that a “national chicken wing introduction may mean higher costs for other restaurants.”

Not that MCD is sweating that fallout. All McDonald’s cares about is a renewed spark — and it’s banking on Mighty Wings to get more people through the drive-thru.

As of this writing, Alyssa Oursler was long MCD.

Source URL: https://investorplace.com/2013/08/mcdonalds-mighty-wings/

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