McDonald's just had its worst day ever after its new Dollar Menu gets slammed as a failure

Reuters

McDonald's new Dollar Menu is a flop, according to RBC Capital Markets analysts.

• McDonald's new $1, $2, $3, Dollar Menu has failed to resonate with customers, according to RBC Capital Markets analysts.
• The analysts are now predicting same-store sales growth of 1% for the first quarter, compared to their previous estimate of 3.5% growth.
• The fast-food chain's shares fell 4.8%, marking the worst dollar decline in history and the steepest percentage drop since October 2008.

McDonald's shares were hammered on Friday after analysts slammed its highly hyped value menu as a flop.

The fast-food chain's shares fell 4.8%, marking the worst dollar decline in history and the steepest percentage drop since October 2008, MarketWatch reports.

The drop came after RBC Capital Markets analysts claimed that McDonald's new $1, $2, $3 Dollar Menu, which rolled out in January, failed to resonate with customers.

"Our sense is that the $1, $2, $3 platform stole attention from local marketing, particularly at breakfast, which likely slowed as a consequence," analysts wrote in a note, in which they cut their price target for the company to $170 from $190. "In addition, we believe the menu's position as a variety play... lacked the 'hero' item necessary to resonate with value-conscious consumers."

"Lastly, we believe McDonald's early signaling of this initiative may have invited a flurry of competitor responses and diminished its overall impact," the analysts added.

The RBC analysts are now predicting same-store sales growth of 1% for the first quarter, compared to their previous estimate of 3.5% growth.

McDonald's revealed plans to roll out the new Dollar Menu menu in late October, which gave its competitors more than two months to come up with a response to the promotion.

The fast-food chain had killed its original Dollar Menu in 2013, and replaced it with a higher-priced value menu. Executives later acknowledged that the move alienated many customers.

The $1, $2, $3 menu offers items including the sausage burrito, McChicken, cheeseburger, and soft drinks of all sizes for $1.

For $2, customers can order the Sausage McGriddle, 2-piece Buttermilk Crispy Tenders, Bacon McDouble, and small McCafé drinks. The Sausage McMuffin with Eggs, new Classic Chicken Sandwich, Triple Cheeseburger, and Happy Meals cost $3.

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