McDonald’s fresh-beef burgers expected to give the Quarter Pounder a boost

McDonald’s Corp.’s fresh-beef burgers are expected to keep the fast-food giant’s griddles busy, company executives said on the Monday earnings call.

McDonald’s MCD, +5.77%  has “trained hundreds of thousands of restaurant crew on new procedures” tied to the use of fresh-beef burgers, Chief Executive Steve Easterbrook said on the call, according to a FactSet transcript. The ingredient will launch nationwide next week, and it’s building on the potential of McDonald’s Quarter Pounder, a menu mainstay.

“We’ve already been serving these sandwiches in select markets throughout the U.S. and the response has been very encouraging,” Easterbrook said. “In our pilot markets of Dallas, 90% of customers who have tried the burgers said they’d buy them again.”

See also: How McDonald’s ranks against other restaurant – the winner may surprise you

Executives say the fresh Quarter Pounders are “hotter and juicier” and makes a “noticeable difference.”

Mark Kalinowski of Kalinowski Equity Research agrees.

“Our view is that the fresh-beef burgers made with the quarter-pound beef patties taste better than their predecessors,” he wrote in a Monday note.

The new initiative comes as McDonald’s breakfast daypart has slipped in the face of competition.

“U.S. guest count declined in the first quarter due to the very competitive breakfast daypart and our conscience decision to simplify our value platform, eliminating most local value offers,” said Chief Financial Officer Kevin Ozan on the call, according to FactSet.

Executives didn’t name any competing chain that’s snapping up market share. But one example might be Starbucks Corp. SBUX, -1.35% which has seen sales of its breakfast food items grow, according to analysts.

Another initiative that has been gaining steam for McDonald’s is delivery in the U.S., which has been rolling out through a partnership with UberEats. McDonald’s has made delivery service a key part of its global growth plan.

Read: Starbucks wants you to take an afternoon coffee break

Neil Saunders, managing director of GlobalData Retail, says data shows that delivery has been successful in a three ways.

“First, around 68% of sales are incremental,” the note said. “Second, the core demographic is mostly younger – around college age – and is new McDonald’s customers. And thirdly, orders tend to come outside of peak store hours. In our view, these dynamics make the service extremely valuable in terms of growth.”

McDonald’s has been targeting millennials with new menu items and other initiatives after a 2016 memo from a franchisee questioned the relevance of the company’s signature Big Mac.

McDonald’s reported earnings and sales that beat expectations, and global same-store sales growth of 5.5%. The company attributed a 2.9% rise in U.S. same-store sales to menu price increases.

Don’t miss: It wasn’t the queso: Chipotle’s new CEO and price hikes drive earnings beat

McDonald’s shares closed Monday up nearly 6%, but are down 2.6% for the year so far. The Dow Jones Industrial Average DJIA, -0.61%   is down 1.7% for 2018 to date.

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