Could McDonald's New Rewards Program Send Shares To New Highs?

Shares of McDonalds Inc MCD are up 8% year-to-date and are trading close to 52-week highs. Could there be room for shares of the fast-food giant to run with the nationwide launch of a loyalty program?

What Happened: The MyMcDonald’s Rewards program will roll out nationwide on July 8, according to QSR Magazine. This marks the first loyalty program in McDonald’s history.

Customers will get 100 points for every $1 they spend at a McDonald’s restaurant. First-time loyalty members will get 1,500 points loaded onto their account after their first order, an offer good through the end of 2021.

Rewards will be available in four tiers.

• 1,500 points: hash brown, vanilla cone, cheeseburger, McChicken
• 3,000 points: medium fry, sausage burrito, 6pc chicken nuggets, large iced coffee
• 4,500 points: Filet O’Fish, large fry, large Frappe, sausage McMuffin with egg
• 6,000 points: Big Mac, Quarter Pounder with cheese, Happy Meal, bacon egg and cheese biscuit
• Related Link: How To Buy McDonald’s Stock

Why It’s Important: The loyalty program is expected to increase engagement and return visits for McDonald’s restaurants.

Over 20 million McDonald’s customers are using the company’s ordering app, which will be a heavy focus of the loyalty program. Test markets in Phoenix and New England reported strong user adoption through the app and loyalty customers visiting restaurants more frequently than non-loyalty members.

McDonald’s restaurants are visited by 85% of the U.S. population at least one time annually, according to the company.

Other restaurants are launching loyalty programs to capture guests in the highly competitive fast-food market. Restaurant Brands International QSR launched a loyalty program on June 17 for its Popeye’s Louisiana Kitchen brand.

Restaurant Brands unit and McDonald’s rival Burger King began testing Royal Perks in February giving 10 points for every $1 spent and allowing delivery customers the chance to earn and spend points, which is different from McDonald’s.

McDonald’s beat earnings and revenue estimates from analysts for the first quarter. Comparable U.S. same-store sales were up 13.6%. Overall company revenue was up 9% year-over-year along with system-wide sales up 12% year-over-year.

McDonald’s will report second-quarter earnings later in July.

MCD Price Action: Shares of McDonald’s are trading flat to $234 on Thursday, nearing a 52 week high of $238.18.