Here's Who Should Worry About McDonald's Mighty Wings
Aug 30th 2013 6:40PM
Updated Aug 30th 2013 6:42PM
In less than two weeks, on Sept. 9, McDonald's will begin rolling out its new bone-in "Mighty Wings."
By Sept. 24, McDonald's plans on adding the wings to its nationwide menu, which means that they'll be available at every one of its roughly 14,000 locations in the United States.
Image source: McDonald's.
There is one caveat: McDonald's is currently only planning to offer the new menu item through the end of November -- that is, assuming Mighty Wings aren't such a huge hit that they become a permanent offering.
As beef prices have continued to stubbornly march higher lately, Mickey D's has been exploring a variety of options revolving around less-expensive menu items, including its decision this May to drop the slow-selling line of third-pound Angus burgers. In their place, McDonald's is now selling three variations of its smaller Quarter Pounder sandwiches.
But remember, McDonald's also began to test Mighty Wings last year on a promotional basis in Atlanta, and decided to expand the program's scope to around 500 Chicago locations earlier this year between January and March.
Of course, its decision to roll out nationwide likely remained up in the air, as historically, high wing prices caused wing-centric concepts like Buffalo Wild Wings to suffer through several tough quarters.
Then, earlier this month, a ray of hope appeared as Buffalo Wild Wings finally reported some moderation in wing prices, saying it paid an average of just $1.61 per pound in all of the second quarter. For those of you keeping track, that's a 15% decrease from the $1.90 per pound it paid on average during all of 2012.
Have no fear
That said, even though McDonald's is set to enter the wing market in a big way, that doesn't necessarily mean Buffalo Wild Wings has anything to worry about.
Remember, B-Wild generally looks to use its casual-dining atmosphere to please sports fans with a penchant for wings and beer, and the chain even measures its success, in part, based on the ebbs and flows of specific sports seasons.
Heck, last quarter's results highlighted the fact that Buffalo Wild Wings' same-store sales were negatively affected when diners had one fewer UFC pay-per-view fight to enjoy in the second quarter compared to the same year-ago period.
By the same token, Buffalo Wild Wings also noted it was looking forward to stronger sales this quarter as it was "already gearing up for fantasy football draft parties," and was "excited for the beginning of the NFL and NCAA football seasons."
Call me crazy, but that's certainly not a statement I'd expect to see in a McDonald's earnings press release.
Here's who should be worried... for now
The folks at Yum! Brands , on the other hand, can't be happy about this week's news.
Remember, in addition to its Taco Bell franchise, Yum! Brands also operates KFC and Pizza Hut, both of which currently rely on similar chicken wing offerings as a key differentiator between themselves and Mickey D's.
And while Taco Bell remains Yum!'s key outperformer, and should serve as a significant source of future growth, KFC managed to post 3% same-store sales growth last quarter, as well. If McDonald's chicken wings prove a success, KFC's growth could falter.
Meanwhile, Yum! management expressed disappointment with Pizza Hut's second-quarter sales, even despite ambitious plans to expand its co-branded WingStreet concept, which the company expects will be included in 75% to 80% of all Pizza Hut Locations by the end of 2013.
Once again, if Mickey D's Mighty Wings entice enough Pizza Hut diners to defect, Pizza Hut's already-poor domestic performance could get even worse.
As a result, despite McDonald's temporary intrusion into one of its core markets, I'm still standing by my previous assertion that any Yum! Brands weakness over the short term should be viewed as a solid buying opportunity for patient long-term investors.
The article Here's Who Should Worry About McDonald's Mighty Wings originally appeared on Fool.com.Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and McDonald's. The Motley Fool owns shares of Buffalo Wild Wings and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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