McDonald’s Corporation’s (MCD) chicken-wing offering for the summer of 2013 is expected to last about six weeks, quelling some analysts’ fears that the price of wings may rise permanently and crush the bottom line of specialty restaurants such as Buffalo Wild Wings (BWLD), says Nick Setyan, Senior Equity Analyst at Wedbush Securities.
“On the first one, McDonald’s was testing wings in a couple of their markets for quite some time. The worry was that if McDonald’s rolls that out to their permanent menu, wing costs will take another big step up. And wings, to give you some context there, about every $0.10 per pound move in wing costs equates to about $0.18 in EPS in both directions, so if they were to go up, it would be a big headwind [for Buffalo Wild Wings],” Setyan said.
Setyan says the chicken wings offering at McDonald’s is planned to last six weeks this summer. He says MCD is using the wings offering to drive traffic into its stores, and as such the profitability of this particular product is not the end goal of the QSR restaurant.
“The market reacted negatively to that, but actually I think that’s a positive because that indicates to me that that’s going to be transient in nature, and from the commentary that we’ve heard, they’re not going to be making very much money on it. It’s more of a strategy to drive transactions to the stores, and so, because there is not much of a profit attached to it, I’m less concerned that they may eventually roll it out to the permanent menu, particularly with wing costs so high,” Setyan said.
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