US fast-food chains' bets on value meal set to face investor scrutiny

By Savyata Mishra and Juveria Tabassum

(Reuters) - The performance of McDonald's and other fast food chains' value meal launches will be closely watched when the U.S. restaurants report quarterly results over the next few weeks.

McDonald's, Burger King and other chains have been scrambling to improve traffic as soaring menu prices put off diners, especially from the lower-income group.

"The focus will be how consumers are responding to that (value and discounts) and more importantly or equally important, how long these discounts will have to go on for to get consumers back," said BTIG analyst Peter Saleh.

In the past few months, McDonald's extended its $5 value meal into August after its launch in June 25, while rival Burger King began offering a $5 "Your Way Meal" and Wendy's rolled out its $3 breakfast deal.

While the promotions are in their early days, some analysts have said their benefit, if any, would be temporary.

"Offering value through promotion is only limited to a couple of items such as McDouble or the McChicken sandwich which are not as enticing as a let's say, a Big Mac or maybe a Whopper Junior from Burger King," said Danilo Gargiulo, senior analyst at Bernstein.

While these offers were rolled out only at the end of the quarter, companies are yet to see meaningful traffic growth.

Foot traffic at McDonald's, Burger King and Wendy's rose 0.4%, 1.6% and 1.4%, respectively, between April and June, as per Placer.ai data.

McDonald's, set to report results on Monday, is expected to post a drop in profit for the first time in six quarters, as well as record slower growth in same-store sales from the prior three months.

Same-store sales at Wendy's, scheduled to report next week, and Burger King owner Restaurant Brands, which reports on Aug. 8, are expected to slow from the levels seen last year.

"The problem in the broader sector right now, is that despite a lot being thrown at consumers, it doesn't seem to be catalysing demand that has been in a rut," Morgan Stanley analyst Brian Harbour wrote in a note.

(Reporting by Savyata Mishra and Juveria Tabassum in Bengaluru; Editing by Arpan Varghese and Arun Koyyur)