Kate MacArthur Crain’s Chicago Business reports that McDonald’s Corp.’s domestic “beverages over burgers” strategy has hurt its core business, an influential investment analyst told clients Friday.

McDonald’s is a burgers-and-fries company, not a beverage company, said Howard Penney, restaurant analyst at New Haven, Conn.-based investment research firm Hedgeye Risk Management LLC, in a conference call to clients. The company doesn’t manage money or trade stock but has a virtual portfolio on companies it follows, and is bearish on McDonald’s shares.

He is betting that the Golden Arches’ menu focus on McCafe beverages, including its espresso-based drinks and smoothies, is unsustainable, complicates restaurant operations, drives customers to lower-priced menu options and strays from the Plan to Win corporate simplification strategy.

Mr. Penney’s analysis shows a two-year trend of declining year-over-year sales at stores open at least 13 months, with the core menu slipping, particularly at its most important lunchtime period. He forecasts the chain will see declines of 1% to 4% in those comparable sales starting in March.

“The pendulum has clearly swung too far,” he said, arguing that the company needs to refocus on its core burgers and fries.

The Oak Brook-based chain allocated 43% of its $1.17-billion U.S. advertising budget last year to beverages and 37% the year before, according to Hedgeye research. Mr. Penney questioned whether the company can compete with upstart and upscale burger chains, with their higher prices, as it introduces more non-core items like oatmeal and wraps.

Read more at: Crain’s Chicago Business