How Much Of A Financial Impact Will McDonald's New Loyalty Program Make?

Shares of fast-food giant McDonald's Corp MCD have lagged the market in the past year, but investors have high hopes for the company’s recently launched MyMcDonald’s Rewards loyalty program. On Monday, Bank of America analyst Sara Senatore said the rewards program will likely have a positive impact on McDonald’s numbers in the next couple of quarters.

The Program: Overall, loyalty program launches at other fast-food companies from 2014 through 2019 have produced a 5% acceleration in one-year sales comps and a 2% acceleration in two-year sales comps, Senatore said. She said the current version of McDonald’s loyalty program is fairly standard, so she anticipates it will likely have a similar impact on the company’s numbers as programs at other restaurants have.

McDonald's is offering 1,500 loyalty points for the first order after joining the new program and then 100 points for every $1 spent after that.

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“In keeping with that view, our forecasts reflect a two-year trend above the company’s historical average, but one consistent with decelerating 1-year SSSG,” Senatore said.

Limited Impact: Bank of America isn’t expecting the loyalty program to be a huge bullish catalyst for the stock. Senatore said McDonald’s franchise model limits its EPS upside, and the stock has had a very stable valuation range over the past decade.

Bank of America has a Neutral rating and a $260 price target for McDonald’s.

Benzinga’s Take: Anything that boosts same-store sales is good news for investors, but it looks like McDonald’s loyalty program is fairly basic and likely won’t generate any surprise upside.

The program launched nationwide on July 8, meaning investors will get their first major feedback on its financial impact when the company reports third-quarter earnings in November.

Photo: Courtesy McDonald's